Oil Prices Decline as Markets Focus on US-Iran Talks
Oil prices moved lower on Friday as investors weighed growing hopes for a possible US-Iran truce against fresh concerns over Houthi attacks targeting Saudi Arabia.
Brent crude fell $1.47, or 1.4%, to $105.11 per barrel by 05:41 GMT. Meanwhile, West Texas Intermediate (WTI) dropped $2, or 2.1%, to $92.61 per barrel.
The decline came as markets assessed whether diplomatic efforts could reduce tensions in the Middle East and restore some disrupted energy flows.
US and Iran Explore Possible Path Toward De-Escalation
US and Iranian negotiators in New York are reportedly discussing a phased framework that could help bring the conflict to an end.
Under the potential arrangement, Iran could reopen the Strait of Hormuz, while Washington could gradually remove economic restrictions imposed on Tehran.
Iranian President Masoud Pezeshkian said on Thursday that the timing of an end to the conflict would depend on decisions made by the United States.
The possibility of progress in negotiations has helped reduce some of the geopolitical risk premium that had pushed oil prices higher.
Strait of Hormuz Disruptions Continue to Affect Energy Markets
Since the conflict began at the end of February, around 20% of global oil and gas shipments have reportedly been disrupted or restricted.
The Strait of Hormuz remains one of the world’s most important energy transit routes. As a result, any signs that traffic could normalize have a major influence on crude oil prices.
Tim Waterer, chief analyst at KCM Trade, said expectations for diplomatic progress were helping oil markets absorb the impact of fresh military activity in the region.
Brent and WTI Move in Different Directions
Oil prices had climbed sharply on Thursday, with both major crude benchmarks gaining as much as 5% and reaching their highest levels in roughly a week.
However, their weekly performance has diverged significantly.
Brent crude is up around 1.7% for the week, while WTI has fallen approximately 7.2%.
The difference between Brent and WTI prices has widened to around $12.50 per barrel, its largest spread since May.
Why the Brent-WTI Spread Is Widening
The unusually large gap between Brent and WTI reflects different market conditions in the United States and the broader global energy market.
Concerns over a possible US restriction on diesel exports have contributed to the divergence. Such a move could increase fuel availability inside the United States and place additional pressure on domestic prices.
Normally, Brent and WTI move in broadly the same direction, although WTI typically trades at a discount.
Sugandha Sachdeva, founder of research firm SS WealthStreet, said the expanding spread reflects a growing difference between global supply risks and US oil market fundamentals.
Brent continues to carry a substantial geopolitical premium because Gulf energy supplies remain under pressure.
By contrast, stronger US oil production and elevated inventories have helped keep WTI at a wider discount.
Houthi Attacks Raise Saudi Oil Supply Concerns
Geopolitical risks remain significant despite hopes for diplomatic progress.
Saudi Arabia said it intercepted six ballistic missiles launched by Yemen’s Iran-backed Houthi movement.
According to the Saudi-led coalition in Yemen, the attacks targeted the southern province of Taif and the Yanbu region on the Red Sea.
The developments have raised concerns that further attacks could threaten Saudi Arabia’s oil infrastructure or export routes.
Saudi Arabia Increases Pipeline Flows Toward Yanbu
Saudi Arabia has been increasing crude oil flows through its East-West Pipeline, which connects production areas with the Red Sea export hub at Yanbu.
The pipeline provides an alternative route for oil exports that avoids the Strait of Hormuz.
However, crude tanker loadings from Yanbu have not yet fully resumed, according to industry sources, shipping information and satellite data.
Middle East Risks Keep Oil Markets Volatile
Oil markets remain highly sensitive to developments involving Iran, Saudi Arabia and the wider Middle East.
A successful US-Iran agreement could ease concerns over shipping disruptions and place downward pressure on crude prices.
However, continued Houthi attacks and risks to Saudi energy infrastructure could quickly push geopolitical concerns back to the forefront.
For now, traders are balancing the prospect of diplomatic progress against the possibility of further disruptions to global oil supplies.
