Oil Prices Slide as Iran Peace Hopes Pressure Brent and WTI

Oil prices fell sharply on Friday and were headed for steep weekly losses. Traders reacted to growing hopes that a U.S.-Iran peace deal could soon be finalized, potentially leading to the reopening of the Strait of Hormuz.

The Strait of Hormuz is one of the world’s most important energy routes. Any sign that it could reopen has reduced supply fears and pushed crude prices lower.

Trump Signals Progress on Iran Peace Deal

President Donald Trump said on Thursday that an agreement with Iran had been reached and could be signed soon, possibly over the weekend.

The announcement improved market sentiment and increased expectations that tensions in the Middle East may ease. Positive comments from Tehran and Pakistan, which is acting as a key mediator, also supported optimism around a possible deal.

By 15:10 ET, Brent crude futures for August delivery were down 3.7% at $87.00 per barrel. U.S. West Texas Intermediate crude futures for July delivery fell 3.6% to $84.54 per barrel.

Both benchmarks were on pace for weekly losses of more than 6%.

Brent Falls Below $90 as Supply Fears Ease

Brent crude slipped below $90 per barrel on Thursday after Trump suggested that the war with Iran, now in its fourth month, may be close to ending.

According to Trump, the deal would reopen the Strait of Hormuz, a crucial passage for around one-fifth of global oil and gas flows. He also said the agreement would end the U.S. naval blockade of Iran’s ports and coastline.

In addition, Trump claimed that Iran would not be allowed to obtain a nuclear weapon under the proposed agreement.

However, uncertainty remained after Iranian media reported that a memorandum of understanding with Washington could include the release of frozen Iranian funds. The report also suggested that final negotiations would focus on nuclear and economic issues, while excluding Iran’s missile program.

Trump strongly rejected those reports, saying the details did not match the written terms that had been agreed.

Iran and Pakistan Keep Peace Hopes Alive

Although Trump’s criticism created some doubts, Iran’s Foreign Minister Seyed Abbas Araghchi later said that a memorandum of understanding had never been closer.

He urged the media to avoid speculation until the deal is finalized, adding that official details would be shared with the public at the right time.

Pakistan also struck an optimistic tone. Prime Minister Shehbaz Sharif said that a final agreed text had been reached and that Pakistan was working with both sides on the next steps.

His comments helped restore confidence that a diplomatic breakthrough may still be possible.

Brent Returns to Early March Levels

The latest decline pushed Brent crude back toward levels last seen in early March, shortly after the start of the U.S.-Israeli assault on Iran in late February.

Even after the recent selloff, Brent remains above its pre-war level of around $70 per barrel. The conflict-driven surge in oil prices has contributed to inflation pressure across major economies.

Recent U.S. consumer and producer price data showed signs of an inflation shock linked to higher energy costs. The European Central Bank also cited the oil price spike connected to Iran as one reason behind its latest interest rate hike.

Still, oil prices have been falling faster since late May as markets increasingly price in the possibility of an end to the conflict.

Analysts See Limited Downside Without Hormuz Reopening

Vikas Dwivedi, global energy strategist at Macquarie, said the recent oil selloff was driven by optimism that a U.S.-Iran deal could reopen the Strait of Hormuz.

However, he argued that crude may still find support as long as the strait remains effectively closed.

According to Dwivedi, oil prices could have more short-term upside than downside unless there is a major move toward reopening the key shipping route.

He also noted that the market has continued to fall despite ongoing military tensions, suggesting traders still believe a deal is progressing.

OPEC Revises Oil Demand Forecasts

Meanwhile, OPEC updated its oil demand outlook on Thursday.

The group now expects global oil demand in 2026 to grow by 1 million barrels per day from the previous year. That is lower than its earlier forecast of 1.2 million barrels per day.

However, OPEC raised its 2027 demand growth forecast to 1.7 million barrels per day, up from its previous estimate of 1.5 million barrels per day.

OPEC’s outlook remains more optimistic than other major forecasters. The U.S. Energy Information Administration expects global oil demand to fall by 1.1 million barrels per day in 2026. The International Energy Agency expects a smaller decline of 420,000 barrels per day.

OPEC said the global economy has remained resilient so far this year. However, it added that geopolitical events and U.S. tariff developments will remain important risks to watch in the second half of 2026.