Oil prices fell almost 2 per cent on Friday and posted their steepest weekly decline since early April, on hopes that the US and Iran may finally strike a peace deal.
US President Donald Trump held a meeting in the White House's Situation Room on Friday to make a “final determination” on a proposed agreement with Iran. However, the meeting ended without a decision, multiple news outlets have reported.
Brent crude futures settled 1.7 per cent lower at $91.12 a barrel, while West Texas Intermediate fell 1.73 per cent to $87.36 per barrel.
Brent plunged about 12 per cent this week, its sharpest drop since the week ending April 6, while WTI shed nearly 10 per cent for its largest weekly loss since mid-April. The slip comes as traders bet that the US and Iran will eventually agree to reopen the Strait of Hormuz, the conduit for about a fifth of global oil supply before the war.
Gold, meanwhile, rallied above $4,500 an ounce, extending a recovery from a two-month low, as the prospect of a ceasefire extension eased expectations of higher-for-longer interest rates. The precious metal added 0.84 per cent to $4,539.76 an ounce.
The truce between the US and Iran is fragile, with both sides accusing the other of breaching it. Mr Trump in a post on Truth Social said he would make a “final determination” on a proposed deal with Iran, which would immediately reopen the Strait of Hormuz and prohibit Tehran from obtaining a nuclear weapon.
A representative of Iran's Foreign Ministry told Iranian state TV that a memorandum of understanding between Washington and Tehran has not yet been finalised.
The proposed 60-day deal would guarantee free passage through the waterway, with Tehran clearing mines within 30 days. Washington has ruled out near-term sanctions relief and insists Iran will not have control of the strait.
US forces launched strikes on Iranian sites near Hormuz this week, hitting a launch site and downing drones, while Iran's Islamic Revolutionary Guard Corps fired warning shots at passing vessels and claimed a strike on a US airbase. The risk premium spread beyond the Gulf after tankers were hit by drones off Turkey's Black Sea coast.
Of the 53 container vessels caught inside the Gulf when Iran shut the strait, only nine have managed to exit, leaving crews and cargo in indefinite commercial limbo, Kpler says.
Asian flows have been severely affected. Japan's crude imports plunged almost 66 per cent year-on-year in April, to about 850,000 barrels a day, the lowest in more than 60 years, as the disruption throttled Middle East shipments.
On the supply side, Saudi Arabia, the world's largest oil exporter before the war, is poised to cut its official selling prices for most grades to Asia in July, a Reuters survey showed, as softer Dubai quotes and slim refining margins erode its pricing power.
The cut would underline a deeper retreat by Asian buyers. Chinese imports of Saudi crude are set to drop to about 600,000 bpd by the end of June, from about 1.6 million bpd in February, with refinery runs at the lowest since August 2022.
US crude, petrol and distillate stockpiles all fell last week, according to the Energy Information Administration, as refiner and consumer demand rose and exports declined.
“While oil flows through the Strait of Hormuz remain restricted and oil inventories keep falling, the market focus remains on the possibility of a deal,” said UBS analyst Giovanni Staunovo, adding that the price drop could be forcing some traders to close long positions.
Commerzbank raised its Brent forecast to $90 a barrel by the end of September, assuming the strait stays shut to normal shipping for another two months.
Washington has kept up the diplomatic pressure on Iran over the crisis in the strait. US Treasury Secretary Scott Bessent said sanctions have been imposed on Tehran's self-proclaimed Strait Authority, calling it “a joke” and warning corporate or state entities against paying tolls or disguising them as aid payments.
The move came as part of the Treasury's Economic Fury campaign, with Mr Bessent saying the Iranian economy and currency were “in free fall”.
Stock markets mixed
Global stock markets, meanwhile, were mostly up at the closing bell as investors pinned their hopes on a breakthrough in talks between the US and Iran.
On Wall Street, the Dow Jones Industrial Average climbing 0.72 per cent, the S&P 500 adding 0.22 per cent and the tech-rich Nasdaq Composite advancing 0.21 per cent. The modest gains were led by technology stocks.
In Europe, London's FTSE 100 fell about 0.2 per cent amid bearish investor sentiment. Frankfurt's DAX and Paris' CAC 40 were nearly flat.
Earlier in Asia, Tokyo's Nikkei 225 jumped 2.53 per cent to a record, boosted by news that ChatGPT maker OpenAI gave a number of Japanese banks access to its latest artificial intelligence model.
The Shanghai Composite was off 0.7 per cent, while Hong Kong's Hang Seng index added. 0.7 per cent.
