Oil prices ended nearly 1 per cent higher on Friday but still posted a sharp weekly loss on the prospect of increased supply in global markets after the US and Iran signed a deal to end the war in the Middle East, and a truce between Israel and Hezbollah was agreed.
Crude was steady earlier in the day as Washington and Tehran prepared to begin the first round of negotiations in Switzerland, aimed at securing a lasting agreement within 60 days.
But the talks and a signing ceremony were scrapped, and both sides ultimately signed the initial agreement - which will also reopen the Strait of Hormuz - separately.
Meanwhile, Israel and Hezbollah said both sides had agreed to a ceasefire that started at 4pm Israel time on Friday, Reuters reported.
However, the situation remained fragile, as news of the truce emerged after Israeli strikes killed at least 47 in southern Lebanon and fighting intensified despite the US-Iran deal, which stipulated that war would stop across all fronts.
Brent, the benchmark for two thirds of the world's oil, added 0.9 per cent to end at $80.57 a barrel. West Texas Intermediate, the gauge that tracks US crude, settled 0.91 per cent higher at $76.54 a barrel.
From last week's close, Brent slid 7.7 per cent and WTI retreated nearly 10 per cent.
The sharp weekly decline came as "stranded cargoes began leaving the Gulf and major producers, including Kuwait, prepared to restore output", said MUFG research analyst Soojin Kim.
Shipping traffic through the strait, a vital waterway for more than 20 per cent of the global supply of crude oil and liquefied natural gas (LNG), came to a virtual standstill amid a double blockade imposed by Iran and the US after war broke out between the two sides on February 28.
Only a few vessels were able to transit the strait daily, down from more than a hundred before the war. Nearly 500 ships were believed to be stranded in the Arabian Gulf.
However, the prospect of increased traffic across the strait improved following the signing of an agreement between the US and Iran on Wednesday to end the conflict and reopen the water channel.
25 ship transits on Thursday
A tanker carrying Qatari LNG and three tankers with Saudi oil left the strait on Thursday, the first day of the deal's implementation, with more tankers waiting to exit, Kpler data show.
Overall, there were 25 ship crossings across the strait on Thursday, including one LNG tanker and two fertiliser carriers as well as five sanctioned vessels and ballast vessels.
Traffic was evenly distributed across both directions, with most vessels following established Iranian route patterns, according to Kpler data.
“Although oil has surrendered most of the war-related risk premium, a full normalisation of flows is likely to take time as producers restart fields, repair infrastructure, clear mines, and rebuild shipping confidence,” Ms Kim said.
She added, however, that the market is increasingly pricing in a gradual return of Middle Eastern supply, “reinforcing expectations of a more balanced oil market in the second half of 2026”.
Kuwait, Opec's fifth-largest producer, plans to ramp up output to two million barrels per day within a week as the Strait of Hormuz reopens, Sheikh Nawaf Al Sabah, Kuwait Petroleum Corporation’s chief executive, said on Thursday.
Iraq's oilfields are also ready to resume production, and output will gradually return to normal, restoring previous rates, Oil Minister Basim Mohammed said.
“Markets should brace for whipsaw trading rather than a clean directional move,” Tiago Lacerda, market analyst at Axi, said.
“The structural risk now points the opposite direction from three months ago: not a supply shock, but the possibility that returning Gulf and Iranian barrels overshoot a market that spent a quarter unable to absorb them, dragging prices towards levels last seen before the war began.”
