Oil prices experienced a slight decline on Friday, fuelled by optimism surrounding the potential for an agreement between the U.S. and Iran to prolong their ceasefire. Comments from U.S. Vice President JD Vance indicated that the two sides were “close” but “not there yet,” marking the culmination of the decline. Brent crude futures for July, set to expire on Friday’s settlement, declined by 35 cents, or 0.37%, reaching $93.36 a barrel. U.S. crude futures experienced a decrease of 63 cents, representing a 0.71% decline, settling at $88.27 per barrel. The August Brent contract declined by 46 cents, representing a decrease of 0.50%, settling at $92.24. Despite the decline, oil prices have exhibited significant volatility in recent sessions.

Brent has experienced a decline exceeding 8% for the week, having reached a low of $87.11, in contrast to the previous week’s peak of $109.47. Markets have experienced significant fluctuations in response to ambiguous indicators regarding a potential conclusion to the three-month period. On Thursday, geopolitical tensions escalated following new U.S. strikes on an Iranian military site overnight, despite ongoing diplomatic discussions between Washington and Tehran. Iran’s Revolutionary Guards subsequently announced that they targeted a U.S. airbase, as reported. As reported that the U.S. and Iran reached an agreement on Thursday to prolong their ceasefire and lift restrictions on shipping through the strait. However, U.S. President Donald Trump has yet to approve the agreement, while Iranian state media reported that the deal had not been finalised.

In remarks, Vice President JD Vance indicated that discussions between Washington and Tehran continue to address several outstanding matters, notably Iran’s enriched uranium inventory and issues related to enrichment. “I can’t guarantee that we’re going to get there, but right now I feel pretty good about it,” Vance stated, noting that the United States still possesses the ability to considerably hinder Tehran’s nuclear program. Analysts indicated that, should a ceasefire agreement be established, the restoration of normal shipping operations through the Strait of Hormuz may require several months, while the repair of damaged energy infrastructure could necessitate an even more extended period to achieve full normalisation. Earlier this month, Saudi Aramco CEO Amin Nasser cautioned that disruptions in the Strait of Hormuz could postpone stability in global oil markets until 2027, with nearly 100 million barrels of oil supply per week potentially impacted. Saudi Aramco stands as the preeminent oil producer globally.

Morgan Stanley characterised the present oil market as being in “a race against time,” highlighting that the elements inhibiting a more pronounced increase in crude prices could diminish if the Strait of Hormuz remains closed through June. The broking indicated that heightened U.S. crude exports, coupled with diminished demand from China, have thus far contributed to mitigating a portion of the supply shock. However, it cautioned that an extended closure of Hormuz could once again constrict global supplies if disruptions persist beyond the absorption capacity of the U.S. and China.