-
The ceasefire in the Middle East has eased supply concerns, leading to a 16% drop in oil prices.
-
With geopolitical risks fading, renewed worries over weaker global demand are limiting crude’s recovery.
-
Additionally, Fed Chair Powell’s hawkish tone during Tuesday’s congressional testimony added further downward pressure on prices.
Crude Oil is stabilizing on Wednesday after shedding over $10 since Monday’s peak, with WTI prices remaining capped below the $65.00 level. The recent ceasefire between Israel and Iran has significantly reduced concerns over potential supply disruptions, helping drive oil prices back to pre-conflict levels.
While the truce remains fragile, it has held for a second consecutive day. Iran’s oil production appears unaffected by recent Israeli strikes, and the threat of a blockade at the crucial Strait of Hormuz has subsided, further easing supply fears.
Demand-Side Concerns Dominate Market Sentiment
Despite reduced geopolitical risk, crude oil continues to face downward pressure from persistent demand concerns. The U.S. economy is showing increasing signs of a slowdown. On Tuesday, consumer confidence fell sharply in June, reinforcing the cautious tone set by earlier economic data.
Elsewhere, economic stagnation in the Eurozone and China’s faltering recovery are adding to the bearish outlook. Against this backdrop, OPEC+’s intentions to continue increasing output have raised fears of a potential oversupply, further weighing on prices.
Adding to the negative sentiment, Federal Reserve Chair Jerome Powell on Tuesday maintained a hawkish stance, refusing to commit to any near-term rate cuts. He highlighted ongoing upside risks to inflation, particularly from proposed tariffs, reinforcing expectations of a prolonged period of tight monetary policy. This stance is dampening economic activity and, by extension, oil demand, keeping further pressure on crude prices.
