Oil prices traded in a tight range on Tuesday, following losses of over 2% in the previous session, as investors reacted to reports of a potential ceasefire between Israel and Hezbollah.
The developments reduced the geopolitical risk premium that had been supporting crude prices.
By 2:05 pm AEDT (3:05 am GMT) Brent crude futures gained $0.08 to US$73.07 per barrel, while U.S. West Texas Intermediate (WTI) crude added just $0.03 to US$68.97 per barrel.
A truce in the Israel-Hezbollah conflict could ease concerns about Middle East tensions affecting oil supply.
Iran, a key Hezbollah backer and OPEC member, produces approximately 3.2 million barrels per day (bpd), accounting for 3% of global output.
Elsewhere, tensions remain high in Europe, with Kyiv under sustained Russian drone attacks. Hostilities between Russia, a major oil producer, and Ukraine escalated last week after the U.S. authorised Ukraine to use American-made weapons for strikes deep into Russian territory.
In addition to these developments, uncertainty surrounds U.S. trade policy after Trump vowed to impose a 25% tariff on all imports from Mexico and Canada.
While it is unclear if crude oil will be included, Canadian oil - responsible for the majority of Canada’s 4 million bpd exports to the U.S. - remains difficult to replace due to its unique characteristics.
This decision follows a broader trend of supply management by OPEC+, which has delayed production hikes to balance fluctuating market conditions.