HOUSTON: Global oil prices fell by more than 4% on Friday after reports emerged that China had initiated efforts to revive stalled peace negotiations between the United States and Iran, easing immediate concerns over escalating geopolitical tensions in the Middle East.
Despite the sharp decline, both international benchmark Brent crude and US West Texas Intermediate (WTI) remained on track for strong weekly gains, driven by heightened supply risks following missile exchanges between the United States and Iran, reduced tanker traffic through the Strait of Hormuz, and attacks on commercial shipping in the Red Sea by Yemen’s Houthi forces.
Brent crude settled at USD 96.78 per barrel, down USD 3.91 or 3.88%, after closing above the USD 100 per barrel mark in the previous session for the first time since May. Even with Friday’s decline, Brent was set to record a weekly gain of nearly 10%.
Meanwhile, WTI crude closed at USD 89.31 per barrel, falling USD 2.88 or 3.12%, while remaining on course for a weekly increase of 8.27%.
Market analysts attributed the decline to optimism surrounding possible diplomatic progress.
“There’s nothing this market loves more than hope,” said John Kilduff, Partner at Again Capital. “Nobody wants to get suckered, so any hint this may get settled they will take. Nobody wants to think we’re on a one-way course.”
However, analysts cautioned that the oil market remains highly vulnerable to further geopolitical developments.
Phil Flynn, Senior Analyst at Price Futures Group, said global energy markets remain in a fragile position due to tight supply conditions.
“Overall stocks remain pretty tight, and that situation could turn on a dime, so it’s worth keeping a close watch as things develop,” he said.
Tensions remain elevated after US President Donald Trump warned Iran and its Houthi allies of “major military punishment” following attacks on two Saudi oil tankers in the Red Sea.
Iran has reportedly urged the Houthis to block the Bab el-Mandeb Strait if US attacks on Iranian infrastructure continue. The strategic waterway is the world’s second-most important energy shipping route after the Strait of Hormuz.
The Houthis have also declared a naval blockade on Saudi Arabia, forcing the kingdom to rely more heavily on pipelines to bypass the Strait of Hormuz.
Despite security concerns, shipping activity has shown signs of resilience. According to ship-tracking firm Kpler, vessel movements through the Strait of Hormuz remained steady at three transits per day over the past three days, while traffic through the Bab el-Mandeb Strait increased to 32 commodity vessels on July 23, up from 26 the previous day.
“In the right seas, ships are still moving, so it’s not a complete blockade as some might have feared,” said Giovanni Staunovo, Energy Analyst at UBS.
Analysts at JPMorgan warned that prolonged supply disruptions could significantly tighten the global oil market. The bank estimates that each additional month of disruption could add USD 7–8 per barrel to Brent crude prices, potentially pushing the monthly average to around USD 114 per barrel if disruptions continue for three months.
Meanwhile, geopolitical risks extended beyond the Middle East. Russia reported that its forces carried out overnight strikes on three Ukrainian ports, targeting fuel storage facilities and logistics infrastructure supporting Ukraine’s military operations.
In a separate development, Kazakhstan’s Energy Ministry confirmed that several oil producers temporarily reduced output after suspected Ukrainian drone attacks forced the closure of the country’s main Black Sea oil export terminal, adding another layer of uncertainty to global energy supplies.
By Reuters
