Oil prices climbed on Wednesday as investors assessed the stability of a ceasefire between Iran and Israel, while support also came from market expectations that interest rate cuts could happen soon in the United States, the world's largest economy.

Brent crude futures rose $1.2, or 1.8%, to $68.34 a barrel at 0701 GMT, while U.S. West Texas Intermediate (WTI) crude gained $1.18 cents, or 1.8%, to $65.55.

Brent settled on Tuesday at its lowest since June 10 and WTI since June 5, both before Israel launched a surprise attack on key Iranian military and nuclear facilities on June 13.

Prices had rallied to five-month highs after the U.S. attacked Iran's nuclear facilities over the weekend.

"Geopolitical risk premiums have been reduced and will take a backseat for now...Fed Chair Powell's first testimony to Congress (yesterday) has hinted at a slight chance of bringing forward the first rate cut of 2025 to July...which should offer some form of floor on oil prices from the demand side," said OANDA senior market analyst Kelvin Wong.

Lower interest rates typically spur economic growth and demand for oil.

A slew of U.S. macroeconomic data released overnight including on consumer confidence showed possibly weaker than expected economic growth in the world's largest oil consumer, bolstering expectations of Federal Reserve rate cuts this year. Futures point to nearly 60 basis points worth of easing by December.

On the geopolitical front, a preliminary U.S. intelligence assessment said U.S. airstrikes did not destroy Iran's nuclear capability and only set it back by a few months, as a shaky ceasefire brokered by U.S. President Donald Trump took hold between Iran and Israel.

Earlier on Tuesday, both Iran and Israel signalled that the air war between the two nations had ended, at least for now, after Trump publicly scolded them for violating a ceasefire.

As the two countries lifted civilian restrictions after 12 days of war - which the U.S. joined with an attack on Iran's uranium-enrichment facilities - each sought to claim victory.

Oil prices will likely consolidate at around $65-70 per barrel levels as traders look to more U.S. macroeconomic data this week and the Fed's rate decision, said independent market analyst Tina Teng.

Investors were also waiting on U.S. government data on domestic crude and fuel stockpiles due on Wednesday. [EIA/S]

Industry data showed U.S. crude inventories fell by 4.23 million barrels in the week ended June 20, market sources said, citing American Petroleum Institute figures on Tuesday. [API/S]

Source: Investing.com