International oil prices stabilized temporarily on Friday, after recording their biggest single-day drop this week. The market is rebalancing two forces: first, the signs of easing tensions in US-Iran negotiations; and second, the stalled ceasefire in Lebanon, indicating continued instability in the Middle East.
Brent crude futures remained around $93 a barrel, after falling 2.8% in the previous session; WTI crude futures fluctuated around $91 a barrel, after falling 3.1% the previous day. Despite the short-term pullback, Brent crude is still up more than 4% this week, indicating that geopolitical risk premiums have not completely subsided.
Trump discusses progress in Iran negotiations
US President Trump stated that negotiations with Iran are progressing well, and that the Strait of Hormuz could soon return to normal navigation if an agreement is reached. According to him, progress depends on whether Tehran accepts a memorandum of understanding aimed at halting hostilities.
The Strait of Hormuz is one of the world's most important energy transport routes, handling approximately one-fifth of global crude oil exports. Whenever the market sees a possibility of stability returning to this waterway, the geopolitical risk premium in crude oil prices typically declines.
The prospects for a ceasefire in Lebanon remain uncertain.
However, the regional situation has not eased significantly. Lebanese President Joseph Aoun publicly criticized Iran, saying that Iran is using Lebanon as a bargaining chip in its confrontation with the United States and Israel.
Meanwhile, as the US pushes for an extension of the ceasefire, Israeli strikes against what it claims are Hezbollah targets continue, resulting in multiple deaths. Hezbollah subsequently rejected the ceasefire proposal backed by the US and the Lebanese government, further complicating the prospects for de-escalation in the short term.
The US and Iran still have significant differences in their statements.
Washington and Tehran offer conflicting accounts of the progress of the negotiations. Trump continues to project optimism, even expressing a willingness to engage with Iran's top leaders; however, Iran maintains that the discussions have not yielded any substantial progress.
Iranian Foreign Minister Abbas Araqchi recently stated that there has been no significant breakthrough in contacts with the United States. These conflicting accounts make it difficult for traders to determine whether a diplomatic breakthrough is imminent or if negotiations remain stalled.
The Oman port was briefly suspended.
Aside from diplomatic and ceasefire progress, supply-side risks continue to support the oil market. Oman's Mina Al Fahal export terminal, which was briefly shut down after the explosion and has since resumed operations, serves as a reminder that Middle Eastern energy infrastructure remains fragile.
Overall, the oil market is currently caught between expectations of easing tensions and the reality of conflict. If negotiations continue, the risk premium in crude oil prices may further narrow; however, as long as military action, ceasefire disagreements, and supply disruptions persist, volatility is unlikely to cool significantly.
