Oil prices declined as a conditional ceasefire between Israel and Lebanon fueled market hopes that the U.S. and Iran are moving closer to a peace agreement, despite ongoing conflict casting a shadow over the truce. Copper prices on the London Metal Exchange rose following an increase in withdrawal orders from LME warehouses. Gold prices advanced.
Oil: WTI Drops After Israel-Lebanon Ceasefire Despite Continued Conflict
Crude oil fell as a conditional ceasefire between Israel and Lebanon raised market expectations that the U.S. and Iran are nearing a peace deal, even as persistent fighting clouded the truce.
WTI futures dropped more than 3%, ending a three-day winning streak and settling above $93 per barrel. The Israel-Lebanon ceasefire announced Wednesday could meet a key negotiating demand from Tehran, potentially paving the way for a U.S.-Iran agreement.
Washington and Tehran have outlined a framework to extend a mutual ceasefire by two months and reopen the Strait of Hormuz. However, talks have stalled, and sporadic fighting has resumed.
Iran stated that recent negotiations with the U.S. have made no progress, and the Iran-backed Hezbollah militia has rejected the U.S.-brokered Lebanon ceasefire. Meanwhile, the Strait of Hormuz remains effectively closed. These obstacles, however, did not prevent oil prices from sliding.
"I think the market is still largely clinging to the idea that we are very close to a deal," said Gregory Brew, a geopolitical analyst at Eurasia Group.
Futures extended their decline Thursday morning after former U.S. President Donald Trump posted on social media that negotiations were in their final stages. Trump stated last week that he would soon make a "final decision" on a ceasefire.
"Open interest and volume have dropped to multi-year lows, showing traders are almost completely on the sidelines," said Joe DeLaura, a global energy strategist at Rabobank.
WTI July futures fell 3.1% to settle at $93.04 per barrel.
Brent August futures declined 2.8% to settle at $95.03 per barrel.
Base Metals: LME Copper Advances
Copper prices on the London Metal Exchange rose after an increase in orders to withdraw copper from LME warehouses. Prices for other LME base metals declined.
A large order to withdraw copper from LME warehouses in the U.S. pushed immediately available copper stockpiles to their lowest in three months, following another significant withdrawal wave last month. Concurrently, traders are attempting to navigate arbitrage opportunities related to potential tariffs on copper under the Trump administration.
Copper prices faced earlier pressure after Iran indicated that recent talks with the U.S. regarding an interim peace agreement had made no progress. Meanwhile, fighting in Lebanon continued despite Washington's announcement of a ceasefire between Israel and Lebanon. Base metals have partially given back the substantial gains made earlier in the week.
Analysts at ING wrote in a note that short-term price movements are likely to remain highly sensitive to macro risks, while uncertainty in the Middle East will continue to act as a headwind.
At the close, LME three-month copper was up 0.8% at $13,932 per metric ton.
LME aluminum fell 1% to $3,666 per ton.
LME zinc declined 0.6% to $3,588 per ton.
LME tin dropped 2.9% to $55,744 per ton.
LME lead edged down 0.3% to $2,017 per ton.
Precious Metals: Gold Prices Rise
Gold prices increased after a conditional ceasefire agreement between Israel and Lebanon, which holds promise for resolving broader Middle East conflicts.
Gold rose as much as 1.8%, surpassing $4,515 per ounce, before paring some gains. In a joint statement with the U.S., Israel and Lebanon stated the agreement is contingent on a "complete cessation" of fire by Iran-backed Hezbollah. Despite this, fighting within Lebanon persisted.
As of 4:37 p.m. New York time, spot gold was up 0.9% at $4,475.40 per ounce.
Spot silver advanced 1.6% to $73.9072 per ounce.
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