Oil prices fell around 2% on Friday as hopes increased that the United States and Iran could move toward a truce.
At the same time, markets weighed the possibility of a U.S. ban on diesel exports and continued attacks on Saudi Arabia by Houthi forces, which raised fresh concerns about potential disruptions to Middle Eastern oil supplies.
Brent crude futures dropped $2.28, or 2.1%, to settle at $104.32 per barrel.
West Texas Intermediate crude, or WTI, fell $2.20, or 2.3%, to close at $92.41 per barrel.
For the week, Brent gained less than 1%, while WTI declined by around 8%.
U.S.-Iran Talks Pressure Oil Prices
U.S. and Iranian negotiators in New York are reportedly discussing a phased route toward ending the conflict.
According to sources close to the talks, a potential framework could involve Iran reopening the Strait of Hormuz while Washington gradually removes its economic blockade.
The possibility of diplomatic progress helped ease fears over a prolonged disruption to global oil supplies.
However, major disagreements remain.
Iran has indicated that it is unwilling to make concessions regarding its nuclear program, even if the United States accepts Tehran’s proposal for reopening the Strait of Hormuz.
Iran’s proposal reportedly includes measures such as lifting the U.S. naval blockade on Iranian ports.
Diesel Export Ban Adds Pressure
Energy markets were also focused on reports that Washington could restrict U.S. diesel exports.
Analysts at Ritterbusch and Associates said oil prices were facing renewed selling pressure as traders assessed both the possibility of a diesel export ban and signs of progress toward reopening the Strait of Hormuz.
A potential restriction on diesel exports could reduce incentives for U.S. refiners to process as much crude if more refined fuel is forced to remain in the domestic market.
That expectation has contributed to a widening spread between U.S. crude futures and the international Brent benchmark.
The premium of Brent crude over WTI climbed to its highest level since May for a third consecutive session.
Meanwhile, U.S. gasoline futures fell around 4% on Friday.
Saudi Arabia Faces Renewed Security Concerns
Geopolitical risks remain elevated as Saudi Arabia continues to face attacks from Yemen’s Iran-aligned Houthi movement.
Military chiefs from Saudi Arabia, Turkey and Pakistan are expected to discuss potential support for the kingdom as the attacks continue.
The Houthis have launched strikes against the Saudi-backed government in Yemen and have repeatedly targeted Saudi territory.
These developments have raised concerns about possible disruptions to oil exports from one of the world’s most important energy producers.
Strait of Hormuz Remains Critical
Oil flows through the Strait of Hormuz remain a key focus for energy markets.
Preliminary ship-tracking data from Kpler showed that crude flows through the strait reached around 33.7 million barrels during the week beginning September 20.
That put export volumes roughly in line with the previous week.
Before the conflict with Iran began, approximately 20% of global oil supplies moved through the Strait of Hormuz.
Any prolonged disruption to the waterway could therefore have significant consequences for global crude prices and energy markets.
U.S.-China Relations Also in Focus
U.S. President Donald Trump has also raised concerns about Chinese support for Iran.
According to U.S. Ambassador to China David Perdue, Trump made clear during discussions with Chinese President Xi Jinping that Washington considered Chinese assistance to Iran unacceptable.
At the same time, any improvement in U.S.-China trade relations could support global economic activity.
Stronger economic growth would generally increase demand for oil and other energy products.
Russia-Ukraine Developments Add Another Oil Market Risk
Energy traders are also monitoring developments surrounding the Russia-Ukraine war.
The United States has proposed that the United Arab Emirates host a trilateral meeting involving Ukraine and Russia as part of efforts to move toward a settlement.
Ukrainian President Volodymyr Zelenskiy said the proposal was aimed at discussing possible ways to end the conflict.
Russian President Vladimir Putin has also said that settlement proposals remain under consideration, although Moscow still needs to assess which options are in its interests.
Meanwhile, a drone attack damaged Russia’s Novoshakhtinsk oil refinery and temporarily halted operations.
The incident came amid a series of heavy drone strikes targeting Russian refining infrastructure.
Peace Talks Could Reshape Global Oil Supply
Any agreement that reduces tensions in the Middle East or brings progress toward ending the Russia-Ukraine war could have important implications for global energy markets.
A settlement involving Russia could potentially allow greater volumes of Russian energy exports to return to international markets.
Russia remains one of the world’s largest crude oil producers and a key member of OPEC+.
For now, oil prices remain caught between two competing forces: hopes for diplomatic progress and persistent geopolitical risks that could still threaten global supply.
