The ceasefire barely survived the morning. Iran shut down tanker traffic through the Strait of Hormuz on Wednesday after Israel launched what its military called the heaviest bombardment of Lebanon since the war began, killing at least 254 people and wounding over 1,165.
Two oil tankers had cleared the strait earlier in the day with permission from Iran's Revolutionary Guard. Then the gate closed. Fars, a semi-official Iranian news agency tied to the IRGC, reported that all further passage was suspended in direct response to the Israeli strikes.
Oil prices, which had crashed below $93 earlier Wednesday, bounced back above $96 as traders priced in the risk that the two-week truce might not last two days.
What triggered the reversal
Fifty Israeli Air Force jets struck more than 100 Hezbollah positions across Lebanon using roughly 160 munitions, according to the IDF. The targets included sites in Beirut and across the country. Lebanon's health ministry reported 254 dead and over 1,165 injured.
The core dispute is over what the ceasefire actually covers. Pakistani Prime Minister Shehbaz Sharif, who brokered the deal, announced it applied "everywhere, including Lebanon and elsewhere." Israeli Prime Minister Benjamin Netanyahu immediately contradicted that, saying the truce does not extend to Hezbollah. Trump backed Netanyahu's reading, confirming Lebanon was not part of the agreement.
Iran sees it differently. Tehran insists the deal includes Lebanon. With Hezbollah under the heaviest bombardment in weeks, Iran pulled the one lever it still holds.
IRGC threatens retaliation
Iran's Revolutionary Guard posted on Telegram condemning what it called a "savage attack in Beirut" and warning that continued strikes on Lebanon would draw a "regret-inducing response" from Iran.
The US demanded Wednesday that Iran immediately reopen the strait. Trump posted that the US military would be "hangin' around" Hormuz to make sure traffic flows, adding that "big money will be made."
Where this leaves oil
WTI bounced from below $93 to above $96 on the Hormuz closure news. Brent climbed back near $96 as well. Both benchmarks remain well below Tuesday's $116, but the gap is narrowing fast.
The 800-plus vessels stuck in the Persian Gulf just saw their narrow exit window slam shut after less than 12 hours. Islamabad peace talks between Vance and Iranian negotiators are still set for Saturday, but the atmosphere has shifted completely since this morning's optimism.
If the ceasefire collapses, oil could retrace most of Wednesday's crash. If it holds despite the Lebanon dispute, prices may settle somewhere between the $92 low and the $116 high. The next 48 hours will decide.