Oil prices rose on Friday as the prospect of a lasting truce between the US and Iran was clouded after peace talks in Switzerland were called off and as Israel stepped up attacks on Lebanon.
By 0645 GMT, Brent crude futures gained 51 cents, or 0.64%, to $80.36 a barrel, and US West Texas Intermediate crude rose $1.28, or 1.7%, to $77.88 a barrel, with the front-month July contract expiring on Monday. Both contracts were headed for a weekly loss of about 8%.
The more actively traded WTI August contract was up 59 cents at $76.44 a barrel.
Switzerland said US talks with Iranian negotiators on a pact to end the Middle East conflict would not take place on Friday, as Vice President JD Vance dropped his travel plans, adding to uncertainty over the prospects for a lasting truce.
“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,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
“This is not the geopolitical backdrop that would give the market any confidence in resuming Hormuz transit.”
On Thursday, both benchmarks touched their lowest since early March as several tankers, including three Saudi-flagged vessels carrying 6 million barrels of crude, sailed through the strait hours after the presidents of Iran and the United States signed an interim deal to end their war.
Analysts expect the deal to release more than 85 million barrels of oil stranded in the Middle East Gulf into global markets. The agreement also includes the lifting of US sanctions on Iranian oil, which would further swell supply.
“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,” said Tim Waterer, chief market analyst at KCM.
Roughly a fifth of the world’s oil and liquefied natural gas transited the strait prior to the war, and analysts have suggested trade could return to normal in the coming months if the US-Iran deal holds.
Middle East producers are also gearing up to resume exports.
Kuwait Petroleum Corp said on Thursday it had lifted, with immediate effect, all force majeure notices issued during the war.
Iraq’s oilfields are ready to resume production and output will gradually return to normal, restoring previous rates, Oil Minister Basim Mohammed said.
However, Israel has continued its war against Hezbollah in Lebanon, raising questions about whether the US-Iran peace agreement will hold.
In another disquieting sign for markets, US Vice President JD Vance pulled out of a planned trip to meet Iranian negotiators in Switzerland on Friday.
“This is not the geopolitical backdrop that would give the market any confidence in resuming Hormuz transit,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
