Oil Prices Head Toward Sharp Weekly Losses as US-Iran Peace Deal Hopes Grow
Oil prices moved lower during Asian trading on Friday and remained on track for significant weekly declines as investors assessed the possibility of a U.S.-Iran agreement and reports indicating that both countries are close to extending their current ceasefire.
Improving diplomatic prospects have eased concerns about potential supply disruptions in the Middle East, placing pressure on crude oil markets.
Brent and WTI Crude Extend Weekly Losses
Brent crude futures for July delivery fell 1.3% to $92.45 per barrel, while West Texas Intermediate (WTI) crude futures declined 1.5% to $87.55 per barrel.
Both oil benchmarks were on course to record losses of nearly 10% for the week, marking their steepest weekly declines in several months.
The sharp selloff reflects changing market expectations as geopolitical risks begin to ease and investors reassess the likelihood of supply disruptions.
US-Iran Ceasefire Extension Supports Market Optimism
Market sentiment improved after reports suggested that Washington and Tehran had reached a preliminary framework to extend their ceasefire for another 60 days.
The proposed agreement would allow negotiations to continue regarding Iran’s nuclear program and broader regional security concerns.
However, the deal still requires approval from U.S. President Donald Trump before becoming official.
The possibility of an extended ceasefire has reduced immediate fears of supply shortages and strengthened expectations that shipping activity through the Strait of Hormuz could gradually return to normal.
Strait of Hormuz Remains a Key Risk Factor
Despite improving diplomatic conditions, shipping traffic through the strategically important Strait of Hormuz remains significantly below pre-conflict levels.
As a result, a geopolitical risk premium continues to be reflected in oil prices.
Analysts at ING noted that markets have already priced in much of the expected diplomatic progress. According to the firm, confirmation of a deal that fully reopens the Strait of Hormuz could limit additional downside pressure on oil prices during the early stages of a ceasefire.
ING also highlighted that oil markets are more vulnerable than before the conflict due to substantial inventory drawdowns recorded over the past three months.
Volatility Remains Elevated
Crude oil prices have experienced significant volatility throughout recent trading sessions as markets reacted to rapidly changing developments surrounding ceasefire negotiations.
Oil briefly rebounded on Thursday after reports of renewed military exchanges involving U.S. and Iranian forces. However, those gains quickly faded as optimism surrounding diplomatic efforts returned.
The fluctuating headlines have kept traders cautious, contributing to sharp swings in energy markets.
Inflation and Economic Growth Remain in Focus
Investors are also monitoring broader economic conditions that could influence future oil demand.
Recent U.S. inflation data showed that price pressures remain elevated, with stronger-than-expected Personal Consumption Expenditures (PCE) inflation reinforcing expectations that the Federal Reserve could maintain higher interest rates for longer.
At the same time, revised U.S. economic growth figures pointed to weaker momentum during the first quarter, raising concerns about the outlook for global energy demand.
As markets balance geopolitical developments, inflation risks, and economic growth concerns, oil prices are likely to remain sensitive to both diplomatic headlines and macroeconomic data in the weeks ahead.
