Oil price falls as Strait of Hormuz reopens, but Lebanon fighting rages on

The price of oil has tumbled back to levels last seen before the Iran war, as traffic slowly resumes through the Strait of Hormuz – but the so-called peace deal is being shredded by continued bloodshed in southern Lebanon. Global benchmark Brent crude briefly dipped below $72.48 a barrel – the price on the eve of the US-Israeli attacks on Iran on 28 February – before edging up to $73.23. The slide followed a Memorandum of Understanding signed by the US and Iran on 17 June, which set out a 60-day period for negotiation and prompted a partial lifting of sanctions on Iranian oil exports. The number of vessels crossing the strategic waterway has risen sharply since the deal, with maritime intelligence firm Kpler recording 284 transits from 18 June, though that remains well below the pre-conflict average of about 138 each day. Ships carrying crude oil, liquefied natural gas and fertiliser have been among those making the journey, Kpler told the BBC. Yet even as the oil markets breathe again, the ceasefire’s other front is on fire. In southern Lebanon, at least seven Hezbollah operatives were killed in Israeli strikes, and four Israeli soldiers, including two officers, were wounded in militant attacks. The violence contradicts the terms of the MOU, which was supposed to include a halt to hostilities in Lebanon after Iran insisted on protecting its Hezbollah proxy. Hezbollah’s leader, Naim Qassem, issued a defiant demand: “Israel has no option but to withdraw completely from every inch of our Lebanese land and stop the aggression. Israel must unconditionally.” He added that Iran’s ability to reach the memorandum was “an official declaration of the defeat of America and Israel”. Israel, however, has maintained its right to self-defence, arguing it needs a large ground force in Lebanon to create a buffer zone for its northern border communities. The Israeli Defence Force stormed the Ali Taher ridge, where around 30 Hezbollah fighters are holed up in an extensive tunnel complex, vowing not to allow them to exit or operate in the area. Meanwhile, the United Nations paused the evacuation of about 11,000 sailors stranded in the Strait of Hormuz after Iran attacked a cargo ship. The Islamic Revolutionary Guard Corps warned that any attempt to cross the strait via a UN-designated route would be “unacceptable and completely dangerous”. The Singapore-flagged vessel Ever Lovely was hit by a missile but reported no injuries. Despite the ceasefire, some ships have left the waterway, including eight South Korean vessels. Pre-war, about 140 ships a day passed through; now only 40 to 60 are making the transit. Hundreds of vessels still wait in the Gulf. Pratibha Thaker, regional director of Middle East and Africa at the Economist Intelligence Unit, cautioned: “Markets are still watching the region closely, and any renewed tensions could quickly send oil higher again.” With Hezbollah still fighting and the strait not yet fully open, the question is how long the peace – and the lower fuel prices – will last.