Oil prices were headed for their steepest weekly decline in months as signs of a gradual reopening of the Strait of Hormuz eased concerns over global supply disruptions that had rattled energy markets since the outbreak of the US-Iran conflict. Brent crude fell towards $79 a barrel on Friday and was down more than 9% for the week, while West Texas Intermediate traded near $75.
The decline comes after an interim peace agreement between Washington and Tehran paved the way for shipping activity to resume through the strategically important waterway.
The Strait of Hormuz, which normally handles about a fifth of the world's oil supply, had effectively been shut after both Iran and the US imposed blockades during the conflict. The disruption triggered a sharp spike in crude prices and raised fears of prolonged supply shortages across global markets.
However, sentiment has shifted rapidly over the past week. Tankers carrying crude that had been stranded in the Persian Gulf began moving through the strait on Thursday, while Kuwait said it would start increasing production as exports gradually normalize.
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The US Central Command said it had lifted restrictions on traffic to and from Iranian ports and coastal areas. Meanwhile, maritime authorities have advised vessels to follow designated routes near the Omani coastline as efforts continue to reduce navigational risks, including concerns over sea mines.
The return of shipping activity has prompted traders to unwind much of the risk premium that had built up in oil prices during the conflict. As a result, crude has now surrendered nearly all the gains recorded since fighting began in February.
US President Donald Trump welcomed the fall in oil prices, arguing that markets were responding positively to the agreement. The interim deal also initiates a 60-day period of negotiations aimed at resolving broader issues between the two countries, including Iran's nuclear programme and the future operation of the waterway.
Restarting oil flows involves more than simply reopening shipping lanes. Producers need to bring wells back online, infrastructure must be inspected and repaired, and authorities still need to coordinate de-mining operations in parts of the strait.
Some shipowners and insurers also remain wary of conditions in the region, suggesting that a complete recovery in exports could take time even as traffic gradually improves.
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