Oil prices climbed on Friday as uncertainty continues to surround the fragile peace negotiations between the United States and Iran. Despite some positive diplomatic gestures, investors remain cautious about a swift resolution, contributing to ongoing volatility in the oil market. Brent crude futures rose by $1.58, or 1.54%, settling at $104.16 per barrel, while U.S. West Texas Intermediate (WTI) contracts increased by $1.17, or 1.21%, reaching $97.52 per barrel during late morning trading in Houston.
This rise comes after a turbulent week marked by significant price swings, with Brent crude falling more than 4% and WTI dropping over 7%. These fluctuations reflect shifting market expectations regarding the likelihood of a peace agreement that could alleviate tensions impacting oil shipments through the Strait of Hormuz—a critical chokepoint for global energy supply.
Diplomatic efforts remain active, underscored by Pakistan’s army chief visiting Tehran to support dialogue between the conflicting parties. Meanwhile, U.S. Secretary of State Marco Rubio acknowledged some progress in talks but emphasized that significant disagreements persist, particularly concerning Iran’s uranium stockpile and control over the Strait of Hormuz. Rubio also highlighted that NATO allies have not been engaged to assist in reopening this vital maritime corridor, illustrating the complexity of the geopolitical environment.
Market experts note that intermittent optimism about an impending deal tends to boost prices temporarily; however, cautious remarks from both sides temper these gains. Tamas Varga, an analyst at PVM Oil Associates, pointed out that hopes for a quick truce limit sharp price spikes, especially as global oil inventories are tightening amid constrained flows through the Hormuz strait.
Adding to the diplomatic activity, a Qatari delegation has arrived in Tehran to bolster peace initiatives alongside ongoing U.S. efforts. Yet, six weeks after a tenuous ceasefire began in the broader regional conflict involving Iran and Israel, meaningful progress toward lasting peace remains elusive.
The physical oil market is tightening further as inventories dwindle and supply disruptions persist. Rising fuel costs are stoking inflation concerns worldwide. The CEO of ADNOC recently cautioned that full oil throughput via the Strait of Hormuz may not return until early 2027, even if hostilities cease immediately.
In response to these persistent supply risks, Fitch Solutions’ BMI has revised its average Brent crude price forecast for 2026 upward from $81.50 to $90 per barrel. This adjustment takes into account ongoing supply deficits, the extensive time needed to repair damaged energy infrastructure in the Gulf region, and an expected six- to eight-week period required for normalization following any conflict resolution.
Overall, while diplomatic talks offer a glimmer of hope for easing tensions that have weighed heavily on oil markets, continuing uncertainties and supply vulnerabilities keep prices elevated amid fluctuating investor sentiment ahead of the U.S. summer driving season.
