Global Oil Prices Surge as Iran Strikes Israel, Ceasefire Hangs in the Balance

International oil prices have rebounded sharply following missile attacks by Iran on Israel, which have stalled negotiations and pushed a fragile ceasefire to the brink of collapse.

Brent crude oil rose as much as 3.6% to touch $96.47 per barrel, while West Texas Intermediate (WTI) crude approached $94 per barrel. An Iranian military advisor stated the strikes were a warning to Israel to "cease its hostile actions in Lebanon." The Israeli military reported intercepting all incoming missiles.

In the wake of the attack, the U.S. President urged Iran to return to the negotiating table and criticized Israel's airstrikes on Beirut from the previous day, adding that pressure would be applied to prevent Israeli Prime Minister Netanyahu from taking retaliatory action.

Over the past week, frequent hostilities in the Middle East have pushed a delicate truce to the edge of failure, complicating peace talks. The conflict has led to the near-closure of the critical Strait of Hormuz, disrupting global supply chains for crude oil, refined products, and natural gas.

The U.S. Central Command reported that it shot down two Iranian drones threatening international shipping in the strait on Sunday. This followed an incident on Friday where Iran launched six ballistic missiles towards Bahrain and Kuwait, all of which were intercepted.

Key disagreements remain in the peace agreement negotiations, with the primary obstacle being a simultaneous ceasefire between Lebanon and Israel. Iran has explicitly demanded a Lebanon-Israel truce as a precondition for signing any final deal.

Last week, the Lebanese and Israeli sides had reached a ceasefire agreement contingent on the cessation of hostilities by Hezbollah. However, the Iran-backed militia group rejected the truce, and cross-border fighting continued over the weekend.

Even if a peace deal is ultimately reached between the U.S. and Iran, the full restoration of oil supply faces multiple hurdles. These include clearing mines from the Strait of Hormuz, the months-long process of restarting shuttered oil fields, and repairing energy infrastructure damaged by drone and missile attacks.