Oil prices fell to reach a two-month low on Friday following U.S. President Donald Trump’s decision to abandon plans for military strikes on Iran. This development alleviated worries about a potential escalation in tensions, which had intensified earlier in the week after both parties engaged in attacks. Brent crude futures decreased by $1.21, representing a 1.3% decline, settling at $89.17 per barrel. Meanwhile, U.S. West Texas Intermediate crude saw a drop of $1.23, or 1.4%, bringing it down to $86.48 per barrel. Brent crude experienced a decline of nearly 2% at the open, reaching a low of $88.79 per barrel, following a settlement at a two-month low in the prior session. US West Texas Intermediate crude traded near $86 a barrel.
Brent crude futures decreased by $1.21, representing a 1.3% decline, settling at $89.17 per barrel. Meanwhile, U.S. West Texas Intermediate crude saw a drop of $1.23, or 1.4%, bringing it to $86.48 per barrel. In a statement on Truth Social, Trump indicated that he had cancelled the strikes following discussions that reached the highest echelons of the Iranian leadership, which subsequently granted approval. He stated that essential aspects of a proposed agreement had received approval “in both concept and great detail” from parties including the United States, Israel, Saudi Arabia, the UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, and Egypt, among others.
Trump indicated that the naval blockade would persist until the proposed transaction is completed, with details regarding the timing and location for signing to be disclosed at a later date. Iran’s semi-official Fars news agency, however, indicated that Tehran had not given its approval to the text of any agreement. On Wednesday, Iran declared the closure of the Strait of Hormuz and issued a warning that any vessel attempting to navigate through the waterway would face gunfire. The blockade, enduring for several months, has sustained elevated oil prices, given that the strait usually manages around 20% of worldwide oil and liquefied natural gas shipments.
Despite the closure, the U.S. military reported that commercial vessels continued to navigate the waterway. Haitong Futures indicated that crude prices may approach the upper limit of their trading range, driven by tightening supply-demand dynamics alongside a swift reduction in global oil inventories. Experts also indicated that even if a ceasefire is achieved, shipping operations through the Strait of Hormuz may require months to normalise. Any damage to energy infrastructure would likely extend the recovery process even more, they noted. Nuvama Institutional Equities indicated that a prolonged closure of the Strait of Hormuz could impact approximately 20 million barrels per day of crude oil movement worldwide. In this context, the broking indicated that oil prices might rise to a range of $110 to $150 per barrel.