By: Oil price.com

Oil prices fell in early Asian trading on Thursday following a breakthrough agreement for a pause in fighting between Israel and Hamas, a development that has reduced the geopolitical risk premium baked into the market.

The ceasefire framework, advanced by the Trump administration, includes the release of up to 20 living hostages by Hamas and a pullback of Israeli forces to a negotiated line. This deal marks the most significant step to date toward de-escalating the conflict in Gaza.

Market Reaction: Unwinding the Risk Premium

Markets responded swiftly to the news, with Brent crude falling nearly 1% to $65.71 a barrel and West Texas Intermediate (WTI) dropping to $61.92. The price decline reflects reduced fears of a wider regional conflict that could disrupt vital shipping lanes or damage energy infrastructure in the Middle East.

The downward pressure on oil has been building this week, compounded by other bearish factors. OPEC+ continues to bring more production online, and the U.S. Energy Information Administration (EIA) reported another build in crude inventories, signaling robust supply.

Leadership Responses and Future Price Pressures

President Trump celebrated the agreement on Truth Social, stating that it means "ALL of the Hostages will be released very soon." Israeli Prime Minister Benjamin Netanyahu described it as "a great day for Israel," while Hamas confirmed the deal and called on international guarantors to ensure its full implementation.

Analysts warn that if the ceasefire holds, oil prices could face further declines. Weakness in global demand—driven by slower economic growth, seasonal factors, or improved energy efficiency—combined with sustained high supply, could push prices significantly below current levels. The market will be closely watching whether the truce translates into a lasting period of regional stability.