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Oil prices moved higher on Friday as traders reacted to growing uncertainty surrounding the recently announced agreement between the United States and Iran. The cancellation of planned negotiations in Switzerland, combined with escalating military activity involving Israel and Hezbollah, prompted investors to reassess the likelihood of a lasting resolution in the region.
Brent crude rose 0.64% to $80.36 per barrel, while U.S. West Texas Intermediate gained 1.7% to $77.88 per barrel. Despite the recovery, both benchmarks remained on track for weekly declines of roughly 8%.
The more actively traded August WTI contract climbed 59 cents to $76.44 per barrel.
Investor confidence was shaken after Switzerland confirmed that discussions between U.S. and Iranian officials would not proceed as scheduled.
The talks were expected to focus on implementing a broader framework agreement designed to bring a lasting end to regional tensions. However, the withdrawal of U.S. Vice President JD Vance from the planned meeting raised doubts about the strength of the diplomatic process.
Vandana Hari, founder of Vanda Insights, said: “Prices may have bottomed out and we may see a renewed climb accompanied by plenty of volatility as cracks have already emerged in the memorandum of understanding.”
She added: “This is not the geopolitical backdrop that would give the market any confidence in resuming Hormuz transit.”
Earlier this week, oil prices fell sharply after vessels successfully resumed passage through the Strait of Hormuz following the interim agreement between Washington and Tehran.
Several tankers, including Saudi vessels carrying approximately six million barrels of crude, completed the transit without disruption, boosting hopes that normal shipping activity could gradually resume.
Market analysts estimate that more than 85 million barrels of oil currently stranded in the Gulf region could eventually return to global markets. In addition, the agreement includes provisions for lifting U.S. restrictions on Iranian oil exports, potentially increasing supply further.
Tim Waterer, chief market analyst at KCM, said: “Traders are still waiting for hard evidence that tanker traffic through the Strait of Hormuz is actually normalising before committing to the next leg lower.”
Energy producers across the Middle East are already preparing for a return to more normal export conditions.
Kuwait Petroleum Corporation announced that all force majeure measures introduced during the conflict have been withdrawn. Iraq has also indicated that its oil sector is ready to gradually restore output and return production to pre-conflict levels.
While progress has been made between the United States and Iran, continued fighting between Israel and Hezbollah remains a major source of uncertainty.
Investors are closely monitoring developments, as any escalation could undermine recent diplomatic gains and once again threaten energy supplies from the region.
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