Zinger Key Points
- Oil prices fell after Israel’s Security Cabinet approved a ceasefire deal with Hamas, raising hopes for reduced Middle East tensions.
- Shipping risks remain as S&P Global Ratings said most companies are still avoiding the Red Sea due to Houthi attack threats.
Oil prices extended their decline on Friday after Israel's Security Cabinet approved a ceasefire deal with Hamas, signaling a potential end in the 15-month-long Gaza conflict.
West Texas Intermediate crude futures – as tracked by the United States Oil Fund USO – edged down 0.6% to $78.38 a barrel as of 8:40 a.m. ET, following a sharp 2.7% drop on Thursday.
Brent crude also eased 0.5% to $81 per barrel. Meanwhile, U.S. energy stocks, as tracked by the Energy Select Sector SPDR Fund XLE, edged 0.1% higher in the premarket, eyeing their eight straight day of gains.
In a note Friday, Energy Intelligence said oil prices fell amid expectations that Yemen's Iran-backed Houthi militia may halt attacks on vessels in the Red Sea, thus provoking less disruptions to global trade and oil flows.
Israeli President Isaac Herzog hailed the Security Cabinet's approval of the ceasefire deal as a "vital step," emphasizing the moral and national duty of bringing home Israeli hostages.
In a statement on X , Herzog acknowledged the emotional weight of the agreement, particularly for families whose loved ones may not return in the initial stages.
“I welcome the Israeli Security Cabinet’s decision to approve the hostage deal which will bring our hostages home, as presented by the Prime Minister and the negotiating team. I expect the government to follow suit in swiftly affirming this decision.”
Herzog's statement, released just before Shabbat, also carried a message of hope and national healing, urging Israelis to see this moment as an opportunity to rebuild and shape their shared future.
“I harbor no illusions — the deal will bring with it great challenges and painful, agonizing moments that we will need to overcome and face together. With all my heart, I embrace the families of the hostages, especially those who know that their loved ones will not return in the first stage. We must bring everyone back. Everyone! We will not rest or relent until this happens.”
While the ceasefire agreement must still pass a full Cabinet vote, Herzog's strong endorsement signals growing political momentum behind the deal.
On Thursday, Prime Minister Benjamin Netanyahu spoke separately with U.S. President Joe Biden and President-elect Donald Trump, thanking them for their roles in advancing the deal.
Red Sea Shipping Risks Keep Oil Markets Unsettled
Despite the ceasefire, S&P Global Ratings indicated that most shipping firms are still maintaining alternative routes away from the Red Sea due to ongoing security concerns.
A senior oil trading executive told the rating agency that “the risk of Houthi rebel attacks on ships remains significant,” as the group is backed by Iran.
This continued disruption could sustain pressure on oil prices, given the strategic importance of the Red Sea for global energy trade. The Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden, is a key chokepoint for oil shipments from the Middle East to Europe and North America.
Analysts at Capital Economics say the ceasefire's impact on global inflation and monetary policy may be overstated.
While easing geopolitical tensions could lower energy and shipping costs, the broader disinflationary effects might not be strong enough to significantly influence central banks’ rate decisions.
According to Upstream, if the ceasefire holds, market focus could shift toward the U.S. and Russia. Yet, doubts persist over how durable the peace agreement will be and what it means for long-term stability in the region.
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