BY COMFORT OGBONNA
Oil prices fell more than 1% on Friday and were on track to post their steepest weekly decline since April, as growing expectations of an extended ceasefire between the United States and Iran eased fears of a prolonged disruption to global energy supplies.
The sharp weekly losses came after reports that Washington and Tehran had reached a preliminary agreement to extend a ceasefire in their three-month conflict and begin easing restrictions on shipping through the strategically vital Strait of Hormuz. Although the deal has not yet been officially finalized and still requires approval from U.S. President Donald Trump, investors interpreted the development as a sign that tensions in the Middle East could continue to cool.
Brent crude futures for July delivery dropped 1.1%, or $1.04, to $92.67 a barrel by 0330 GMT. U.S. West Texas Intermediate crude futures fell $1.26, or 1.4%, to trade at $87.64 a barrel.
The weekly declines were even more dramatic. Brent crude was down 10.5% for the week, marking its steepest weekly fall since the week ending April 6. U.S. crude futures were set for a 9.2% weekly decline, the largest weekly drop since the week ending April 13.
Despite the selloff, oil prices remain well above levels seen before the conflict erupted earlier this year. Traders remain cautious because the security situation in the region remains fragile, and shipping activity through the Strait of Hormuz has yet to return to normal levels.
Sources familiar with the negotiations said the proposed agreement would include measures aimed at gradually reopening the Strait of Hormuz and reducing restrictions on maritime trade routes. The narrow waterway is one of the world’s most important energy corridors, handling roughly one-fifth of global oil and liquefied natural gas shipments.
Any threat to shipping through the strait has immediate consequences for global energy markets, inflation expectations, and broader economic stability. Since the outbreak of the conflict, energy traders have closely monitored military developments and diplomatic signals from both Washington and Tehran.
Analysts said the latest decline in oil prices reflects growing confidence among investors that a broader regional escalation may be avoided.
Market strategist Tony Sycamore of IG said traders increasingly believe that the conflict is nearing an end and that a diplomatic agreement could soon emerge. According to Sycamore, as long as optimism surrounding negotiations continues, crude prices may extend their downward trend toward support levels in the low-$80 range.
Oil markets have experienced intense volatility in recent weeks, with both Brent and WTI crude swinging by as much as $6 a barrel in individual trading sessions. Prices have reacted sharply to conflicting reports about ceasefire negotiations, military activity in the Gulf region, and uncertainty over when shipping lanes through the Strait of Hormuz might fully reopen.
Although there are signs of progress, analysts warned that the recovery in global oil supplies will likely take time. Maritime traffic through the Strait of Hormuz remains only a fraction of what it was before the war began, as many shipowners continue to avoid the region due to security concerns.
Energy analysts at ING said reopening the strait would provide immediate relief to oil markets by allowing more tankers to leave the Persian Gulf, but they cautioned that the broader recovery process remains uncertain.
According to ING, upstream oil production in the region has fallen sharply during the conflict, as producers were forced to shut down operations due to storage limitations and logistical disruptions. Restarting production facilities and restoring export capacity is expected to be a gradual process rather than an immediate one.
The analysts also noted that refining infrastructure across parts of the region suffered damage during the conflict, which could further slow the recovery in fuel production and exports. Refineries will need time to increase output, particularly where facilities were targeted during military strikes earlier in the war.
The recent decline in oil prices has also provided some relief to investors concerned about inflationary pressures and rising fuel costs. Earlier in the conflict, fears of prolonged supply disruptions had pushed crude prices sharply higher and raised concerns about the impact on global economic growth.
Financial markets around the world have responded positively to signs of easing geopolitical tensions. Equity markets in Asia and the United States have rallied in recent sessions, while energy stocks have retreated alongside falling crude prices.
Still, analysts warned that oil markets remain highly sensitive to developments in the Middle East. Any breakdown in negotiations or renewed military escalation could quickly reverse recent losses and send prices climbing again.
Investors are expected to continue closely monitoring official statements from Washington and Tehran, as well as updates on shipping activity through the Strait of Hormuz, for further clues about the direction of global oil markets in the weeks ahead.
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