Market Overview

Oil prices rose on Friday as uncertainty increased over whether the temporary truce between the United States and Iran could develop into a lasting agreement. Market sentiment weakened after peace talks in Switzerland were canceled, while Israel continued to intensify attacks on Lebanon.

As of 06:45 GMT, Brent crude rose 51 cents, or 0.64%, to USD 80.36 per barrel. U.S. West Texas Intermediate crude gained USD 1.28, or 1.7%, to USD 77.88 per barrel. However, both benchmarks were still headed for a weekly loss of around 8%.

U.S.-Iran Agreement Still Faces Major Risks

Oil prices had previously fallen sharply after the U.S. and Iran reached an interim agreement aimed at ending the conflict and restoring shipping activity through the Strait of Hormuz. Several oil tankers, including Saudi-flagged vessels, passed through the area after the agreement was signed.

However, the cancellation of the next round of talks in Switzerland raised doubts over whether the agreement can be sustained. U.S. Vice President JD Vance also canceled his travel plans, adding further uncertainty to the market.

Strait of Hormuz Remains the Key Focus

The Strait of Hormuz remains a crucial factor for the global energy market. Before the war, roughly one-fifth of the world’s oil and liquefied natural gas passed through this route.

Although some shipping activity has resumed, analysts say the market still needs clear evidence that tanker traffic through Hormuz is truly normalizing. Without that confirmation, oil prices could remain highly volatile as the risk of supply disruption has not fully disappeared.

Supply Could Recover, but It Will Take Time

If the U.S.-Iran agreement holds, the market could see a large volume of oil stranded in the Middle East Gulf return to global supply. Some estimates suggest that more than 85 million barrels of oil could be released back into the market. The lifting of U.S. restrictions on Iranian oil could also add further supply.

However, restoring oil flows through Hormuz and bringing production back to normal may take months. Shipowner caution, security risks, and the pace of transport normalization remain important variables.

Middle East Producers Prepare to Resume Exports

Several Middle East oil producers have already started preparing to restore export activity. Kuwait Petroleum Corp said it had lifted all force majeure notices issued during the war with immediate effect. Iraq also said its oilfields are ready to resume production, with output expected to gradually return to normal levels.

These moves could help ease supply pressure in the coming period, but markets remain cautious as geopolitical risks in the region are still far from resolved.

Israel-Lebanon Tensions Add Further Risk

Another factor preventing the market from fully trusting the de-escalation scenario is Israel’s continued military campaign against Hezbollah in Lebanon. This has raised concerns that the U.S.-Iran agreement may not be enough to stabilize the broader Middle East region.

This also explains why oil prices rebounded despite earlier expectations that supply conditions would improve after the temporary agreement.

Conclusion

Oil prices rose again as investors questioned the durability of the U.S.-Iran truce. Although shipping activity through the Strait of Hormuz has shown signs of recovery and Middle East oil supply could return to the market, geopolitical risks remain high.

In the short term, oil prices may continue to see strong volatility as markets monitor U.S.-Iran negotiations, developments in the Strait of Hormuz, export activity from Middle East producers, and Israel-Lebanon tensions.

📌 This content is for market perspective sharing only and does not constitute a buy or sell recommendation or investment advice.

Source: Reuters