Oil Prices Recover but Face Steep Weekly Loss
Oil prices moved higher on Friday after recovering from early losses. However, both major benchmarks remained on track for a sharp weekly decline as investors monitored new developments surrounding the US-Iran peace agreement.
The interim accord has reduced concerns about major disruptions to global crude supplies.
Brent crude futures for August rose by 0.8% to $80.45 per barrel. Meanwhile, US West Texas Intermediate crude futures climbed by 1.8% to $77.50 per barrel.
Despite Friday’s recovery, both benchmarks were heading for weekly losses of nearly 8%. Oil prices were also trading close to their lowest levels since early March, when the US-Iran conflict began.
US-Iran Talks Face New Uncertainty
US Vice President JD Vance reportedly suspended planned Geneva negotiations linked to the US-Iran peace process.
Switzerland also announced that talks on a final agreement to end the Middle East conflict would not take place on Friday.
Fresh Israeli airstrikes launched early on Thursday added further uncertainty and raised questions about whether the interim peace agreement would remain in place.
Strait of Hormuz Shipping Begins to Recover
Market sentiment had improved after Washington and Tehran signed an interim accord aimed at ending hostilities and restoring commercial shipping through the Strait of Hormuz.
The strategic waterway normally handles around one-fifth of global oil shipments. Therefore, any disruption can have a significant effect on international energy markets.
The agreement increased expectations that millions of barrels of stranded crude oil could gradually return to global markets over the coming weeks and months.
The United States said it lifted its blockade on Iran on Thursday as the agreement took effect. Reports indicated that vessels carrying delayed oil shipments had already started leaving the waterway.
Returning Supply Removes Oil Risk Premium
The prospect of renewed Iranian and Gulf oil exports has removed much of the geopolitical risk premium that previously pushed crude prices above $120 per barrel at the height of the crisis.
However, industry analysts warned that Gulf oil flows were unlikely to return to normal immediately. Restoring shipping operations and clearing delayed cargoes could require additional time.
Hawkish Federal Reserve Adds Pressure
Broader economic factors also continued to weigh on oil prices.
The Federal Reserve’s hawkish policy outlook strengthened the US dollar by increasing expectations that interest rates could remain elevated for longer.
A stronger dollar can reduce international demand for crude because oil is priced in the US currency, making it more expensive for buyers using other currencies.
