BY COMFORT OGBONNA
Oil prices climbed on Friday as investors reacted to renewed uncertainty surrounding efforts to secure a lasting peace agreement between the United States and Iran, while escalating military activity involving Israel and Lebanon added fresh concerns about stability across the Middle East.
The gains came after planned negotiations between U.S. and Iranian officials in Switzerland were unexpectedly canceled, raising doubts about the future of a recently announced framework agreement intended to end months of conflict. The setback revived fears that geopolitical tensions could continue to disrupt energy markets and threaten critical oil transportation routes in the region.
By 0645 GMT, Brent crude futures rose 51 cents, or 0.64%, to $80.36 per barrel. U.S. West Texas Intermediate (WTI) crude gained $1.28, or 1.7%, to $77.88 per barrel. The front-month July WTI contract is scheduled to expire on Monday. Despite Friday’s rebound, both benchmark contracts remained on track to post weekly losses of approximately 8%, reflecting the sharp decline in prices earlier in the week following optimism surrounding the U.S.-Iran agreement.
The more actively traded August WTI contract also advanced, gaining 59 cents to trade at $76.44 per barrel as traders assessed the evolving geopolitical landscape and its potential impact on global oil supplies.
Market sentiment shifted after Swiss authorities confirmed that scheduled talks between U.S. and Iranian representatives would not take place on Friday. The uncertainty deepened after U.S. Vice President JD Vance canceled plans to travel to Switzerland for discussions aimed at implementing a broader peace agreement between Washington and Tehran.
The cancellation fueled concerns that the path toward a durable ceasefire may be more complicated than initially expected. Energy traders and investors have been closely monitoring developments in the region, recognizing that any disruption to diplomatic progress could have significant implications for global oil flows and market stability.
Analysts noted that recent price declines may have already reflected much of the optimism surrounding the peace agreement and the anticipated increase in global oil supply. With signs of friction emerging in the diplomatic process, some market participants now believe crude prices may find support and potentially move higher in the near term, although volatility is expected to remain elevated.
Investors remain particularly focused on the Strait of Hormuz, one of the world’s most important energy shipping corridors. The narrow waterway serves as a critical route for oil and liquefied natural gas exports from major Middle Eastern producers. Before the outbreak of hostilities, roughly 20% of the world’s oil and LNG supplies passed through the strait, making its stability essential to global energy markets.
Earlier this week, oil prices fell sharply after several tankers successfully navigated the Strait of Hormuz shortly after the presidents of the United States and Iran signed an interim agreement designed to end their conflict. Among those vessels were three Saudi-flagged tankers carrying an estimated six million barrels of crude oil, a development that reassured markets that shipping activity was beginning to normalize.
The prospect of increased supply has weighed heavily on crude prices in recent sessions. Analysts estimate that more than 85 million barrels of oil stranded across the Middle East Gulf region during the conflict could eventually be released into international markets if the agreement remains intact. In addition, the deal includes provisions for lifting U.S. sanctions on Iranian oil exports, potentially allowing millions of additional barrels to enter the global supply chain over time.
However, traders remain cautious about assuming a rapid return to normal conditions. Market participants are seeking clear evidence that tanker traffic through the Strait of Hormuz has fully stabilized before positioning for another significant decline in oil prices. Many investors believe that shipping patterns and export volumes over the coming weeks will provide the clearest indication of whether the peace framework is holding together.
Despite the uncertainty, several major oil-producing countries in the region have already begun preparing for a return to normal operations. Kuwait Petroleum Corporation announced on Thursday that it had immediately lifted all force majeure declarations that were put in place during the conflict, signaling confidence that export operations can resume without major disruptions.
Iraq has also indicated that its oil sector is preparing for a recovery. Oil Minister Basim Mohammed stated that the country’s oilfields are ready to resume production and that output levels will gradually return to pre-conflict rates. The increase in production from Iraq, combined with potential growth in Iranian exports, could significantly boost global oil supply in the months ahead if regional stability improves.
Nevertheless, geopolitical risks remain elevated. While the United States and Iran have moved toward a peace arrangement, Israel has continued military operations against Hezbollah in neighboring Lebanon. The ongoing conflict has raised concerns that broader regional tensions could undermine diplomatic progress and potentially reignite instability across key energy-producing areas.
The continuation of hostilities in Lebanon has become a major source of uncertainty for energy markets. Investors fear that any escalation could threaten infrastructure, disrupt trade routes, or complicate implementation of the U.S.-Iran agreement. As a result, oil prices are likely to remain highly sensitive to political and military developments throughout the region.
For now, traders are balancing expectations of increased oil supply against lingering geopolitical risks. While the potential reopening of export routes and the return of Iranian oil could place downward pressure on prices over the longer term, doubts surrounding the peace process and continued regional conflicts are providing near-term support for crude markets.
As diplomatic efforts continue and Middle Eastern producers work to restore normal operations, global energy markets are expected to remain volatile. Investors will be watching closely for signs that peace negotiations can regain momentum and that shipping activity through the Strait of Hormuz continues to improve, factors that will play a crucial role in determining the direction of oil prices in the weeks ahead.