Oil prices steadied on Friday and are set for a weekly gain as talks between the US and Iran continue despite renewed hostilities that threaten global energy flows through the Strait of Hormuz.
Brent, the benchmark for two thirds of the world's oil, gained 0.58 per cent to $76.54 a barrel at 8.20am UAE time. West Texas Intermediate, the gauge that tracks US crude, also advanced 0.51 per cent to $72.45 a barrel.
Oil prices swung wildly during the week, as the exchange of military strikes stoked fears of an all-out war between the US and Iran. The benchmark is set for a 6 per cent weekly advance.
Brent, which traded at prewar levels last week, rose by more than 5 per cent on Wednesday alone. WTI also swung between gains and losses throughout the week and is set for about a 5.5 per cent weekly jump as the geopolitical situation remains fluid in the region.
Negotiations continue
Oil prices eased after US officials told Axios that Washington was seeking to de-escalate and remained committed to peace talks. The Trump administration is “still committed to finding a resolution, and technical talks continue” to reach a nuclear deal, the official said.
“There are extensive diplomatic efforts to first agree with both sides on de-escalation and then set a date for another round of negotiations between the technical teams,” one regional source said.
The volatility in crude prices follows US President Donald Trump's comments at a Nato meeting in Turkey that he did not want to engage with Iran and declared the peace agreement “over”.
His comments followed attacks on a Qatar-owned LNG tanker and two other ships in the Strait of Hormuz that prompted US strikes on Iran. Tehran retaliated with missile and drone attacks on Bahrain and Kuwait.
Trump trade in play
The tit-for-tat strikes continued on Thursday and Iranian media reported more explosions in the country on Friday, but officials told Al Jazeera the US is not behind the strikes. The scale of the recent attacks by both sides was limited.
“The developments aren’t at all surprising and follow the well-worn playbook: Iran pushes the boundaries of the peace deal, the US retaliates, President Trump says something crazy, everyone panics a little, then the US President claims Iran has reached out to talk it all out and things settle down again,” said Kyle Rodda, senior financial market analyst at capital.com. The latest bout of hostilities, he added, may not be over yet but critical tenets for the market.
“The US-Iran war continues to simmer away and is likely to periodically boil over. But also, the 'Taco' [Trump always chickens out] trade remains in play, meaning violent moves in the markets are somewhat self-limiting.”
Though Mr Trump has played down the prospects of a renewed all-out war with Iran, his administration has revoked a sanctions waiver that had authorised the sale of Iranian oil.
The waiver, granted under the interim agreement signed late last month, gave Iran 60 days to sell its oil. However, its revocation means Tehran will not be able to sell the oil that has already been shipped and is now at sea.
The recent hostilities have sparked concerns about the continued flow of trade through the Strait of Hormuz. The waterway is vital to the global energy supply, especially to markets in Europe and Asia. Before the war, a fifth of global oil and gas supplies crossed the channel.
Vessel traffic through the chokepoint, which appeared to have come to a near halt on Thursday, remained thin on Friday, Bloomberg said. No large commodity ships were seen transiting, although a Greek-owned supertanker with no cargo re-emerged in the Gulf after pushing through the strait.
Iran has threatened to completely close the Strait of Hormuz again to all types of commercial vessels if the US continues to launch military strikes. However, US Central Command on Friday said “Iran does not control the Strait of Hormuz”.
In a post on X, Centcom added: “Since early May, US forces have helped facilitate the successful transit of more than 800 commercial vessels and 380 million barrels of crude oil through the vital international trade corridor.”
“While tanker traffic through the Strait of Hormuz has fallen in recent days, it remains above pre-MoU [agreement between Iran and US] levels, which will provide some comfort to the market,” Bloomberg quoted Warren Patterson, head of commodities strategy for ING Group in Singapore, as saying.
