Oil Price Today (June 1): Crude oil gains over 2% as Israel attacks Iran-backed Hezbollah. What are experts saying?

Oil prices climbed more than 2%, starting June on a weak note, after Israel ordered troops to advance deeper into Lebanon in its conflict with the Iranian-backed Hezbollah group, despite a ceasefire announced more than six weeks ago.

The escalation in hostilities came shortly after the United States hosted peace talks between Israel and Lebanon in Washington on Friday. The renewed fighting weakened hopes that the U.S. and Iran could soon agree to extend their ceasefire arrangement.

Crude oil price on June 1

U.S. crude futures were up $2.37, or 2.71%, at $89.73 a barrel, while Brent crude futures gained $2.16, or 2.37%, to $93.28 a barrel. Last week, Brent crude tumbled about 11% during the week, marking its steepest weekly decline in seven weeks, while U.S. West Texas Intermediate (WTI) fell more than 9%, its biggest weekly drop in six weeks. Both benchmarks touched their lowest levels since mid-April.

The Israel-Lebanon conflict has become the most significant spillover from the Iran war. The confrontation began on March 2 when Hezbollah started launching rockets and drones into Israel in support of its ally, Iran. Although both sides agreed to a ceasefire in mid-April, exchanges of fire have continued.

U.S. President Donald Trump said on Friday that he would soon decide on a proposed agreement to extend the ceasefire with Iran that was first announced in early April. The extension would give negotiators additional time to pursue a lasting settlement to the conflict and address the long-running dispute over Iran's nuclear programme. Israel's participation remains crucial to any agreement, while Iran has repeatedly insisted that Hezbollah must also be included in the discussions.

Analysts noted that even if a deal is reached, it is unlikely to result in a rapid increase in oil supply. The Strait of Hormuz, which handles about one-fifth of global oil and gas flows, has effectively remained closed since the conflict began with U.S. and Israeli strikes in February.

The three-month confrontation involving the U.S. and Iran has repeatedly fuelled hopes of a breakthrough that could lead to the reopening of the Strait of Hormuz. While officials on both sides have suggested that an agreement may be within reach, differences remain over the details of any potential deal.

What’s next?

Market observers said that even if a ceasefire is finalised, it could take months for shipping operations through the Strait of Hormuz to return to normal. Any damaged energy infrastructure may require an even longer period before resuming full capacity.

Earlier this month, Saudi Aramco Chief Executive Officer Amin Nasser warned that disruptions in the Strait of Hormuz could delay stability in global oil markets until 2027. According to him, continued disruptions could affect nearly 100 million barrels of oil supply each week. Saudi Aramco is the world's largest oil producer.

Morgan Stanley described the current oil market as being in "a race against time", saying the factors that have so far limited a sharper rise in crude prices may begin to fade if the Strait of Hormuz remains shut through June.

The brokerage said increased U.S. crude exports and weaker demand from China have helped absorb part of the supply shock so far. However, it cautioned that a prolonged closure of the strait could once again tighten global supplies if disruptions continue beyond the level that the U.S. and China are able to offset.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)