Oil prices fell by more than 3% on Friday and remained on course for a third consecutive weekly decline.
Improving tanker traffic through the Strait of Hormuz and optimism surrounding a possible U.S.-Iran peace agreement outweighed renewed security concerns following an attack on a cargo vessel near Oman.
Brent and WTI Oil Prices Fall
Brent crude futures for August delivery dropped by around 3.4% to $72.70 per barrel.
West Texas Intermediate crude futures fell by approximately 3.5% to $69.40 per barrel.
Both major oil benchmarks were heading for weekly losses of roughly 9%. The decline extended the selloff that began after the United States and Iran reached a preliminary peace agreement last week.
Oil Erases Gains From the Iran Conflict
Oil prices have now surrendered most of the gains recorded since the beginning of the conflict with Iran.
At the height of the crisis, crude prices climbed above $120 per barrel as traders feared major supply disruptions in the Middle East.
However, hopes that regional tensions could ease have reduced the geopolitical risk premium built into oil prices.
Cargo Ship Attack Revives Supply Concerns
Brent and WTI had risen by more than 2% during the previous session after a projectile struck a cargo ship near the Strait of Hormuz.
The incident renewed concerns about the security of one of the world’s most important routes for global energy shipments.
Following the attack, the United Nations’ International Maritime Organization suspended efforts to support the safe movement of ships and crews through the region.
U.S. officials later said that Iran had fired on the vessel. The incident raised questions about whether the preliminary peace agreement between Washington and Tehran would remain intact.
Strait of Hormuz Oil Flows Continue to Recover
Despite the latest attack, the wider trend in oil prices remained negative.
ING analysts said traders were mainly focused on the continued recovery of oil shipments through the Strait of Hormuz.
Crude flows through the waterway reached their highest level since the conflict began earlier in the year.
The improvement has reduced fears of an immediate supply shortage and placed further downward pressure on oil prices.
Stranded Vessels Boost Shipping Volumes
ING warned that part of the recent increase in traffic may be temporary.
Many ships that had previously been stranded in the Persian Gulf are now leaving the region. As those delayed vessels complete their journeys, shipping volumes through the strait could decline again.
Therefore, the recent surge in oil flows may not fully represent normal or sustainable traffic levels.
Peace Hopes Reduce Oil Risk Premium
Brent crude has fallen sharply from levels above $90 per barrel earlier this month.
Traders are increasingly betting that a broader agreement between the United States and Iran could restore more stable oil shipments from the Middle East.
Although security risks remain, the market currently appears more focused on recovering supply flows than on the possibility of further disruption.
Overall, oil prices remain under pressure as improving traffic through the Strait of Hormuz and hopes for a U.S.-Iran settlement reduce supply concerns. However, attacks on commercial vessels could still create renewed volatility if tensions rise again.
