Crude oil benchmarks posted modest gains on Friday as investors grappled with conflicting signals about the durability of a recently signed US-Iran peace agreement. The rally proved restrained, reflecting deep scepticism among traders that geopolitical tensions in the Middle East have genuinely subsided. Brent crude futures climbed 51 cents to $80.36 per barrel, a 0.64% increase, while West Texas Intermediate rose $1.28 to $77.88, yet both contracts remained on track for weekly losses approaching 8%. The front-month WTI July contract, expiring Monday, registered gains of 1.7%, with the more actively traded August futures advancing 59 cents to $76.44 a barrel.
The fragile momentum reflected a stunning reversal from earlier in the week when the presidents of Iran and the United States signed an interim agreement to terminate their conflict. Just hours after that announcement, several tankers including three Saudi-flagged ships carrying a combined 6 million barrels of crude navigated through the Strait of Hormuz, signalling that shipping routes long constrained by regional tensions might soon return to normal operations. That optimism proved short-lived. On Friday, Switzerland announced that planned negotiations between US officials and Iranian representatives would not proceed as scheduled, a setback compounded when Vice President JD Vance cancelled his planned travel to the talks. The cancellation, announced without detailed explanation, immediately triggered questions about whether the accord signed mid-week would survive its infancy.
The collapse of the scheduled negotiations occurred against a backdrop of escalating Israeli military operations against Hezbollah across the Lebanon border. Those attacks inject profound uncertainty into calculations about the durability of the US-Iran understanding, since Iran has long maintained close ties to the Lebanese militia and might face domestic political pressure to respond if Israeli operations expand. Market analysts suggest the combination of cancelled diplomatic efforts and intensifying regional military activity has convinced traders that any release of trapped crude supplies remains speculative at best. Vandana Hari, founder of Vanda Insights, a specialist oil market analysis firm, observed that prices may have found temporary support but warned that volatility would likely persist. "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," Hari noted, adding that the current geopolitical environment offers the market little confidence in sustained normalisation of Hormuz transit.
The Strait of Hormuz represents a critical global chokepoint through which roughly one-fifth of the world's oil and liquefied natural gas flowed before the US-Iran conflict escalated. A sustained resumption of normal shipping through the waterway would prove transformative for global energy markets and prices. The interim deal theoretically clears the path for such normalisation, yet traders remain unconvinced that the agreement will survive long enough to materialise that outcome. Tim Waterer, chief market analyst at KCM, captured this hesitation succinctly: "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." This stance reflects a fundamental divide between the bullish theoretical implications of the peace accord and the bearish reality that geopolitical risks remain acute.
Production resumption across the Middle East would dramatically amplify the supply shock. Analysts project that the US-Iran agreement could release more than 85 million barrels of oil currently stranded in the Persian Gulf region into global markets. Beyond those existing stockpiles, lifting US sanctions on Iranian petroleum exports would further expand available supply, potentially applying severe downward pressure on prices. Middle Eastern producers have begun positioning to capitalise on the accord. Kuwait Petroleum Corporation lifted all force majeure notices issued during the conflict, indicating its readiness to restore normal export operations. Iraq's Oil Minister Basim Mohammed signalled that his country's oilfields stand prepared to resume production, with output gradually returning to pre-conflict rates through coming months.
For Malaysian and Southeast Asian energy consumers and policymakers, the implications of this unfolding situation merit careful attention. The region depends significantly on Middle Eastern crude imports, and lower prices would translate into reduced costs for refineries, petrochemical facilities, and power generation across the region. Conversely, if regional tensions re-escalate and the US-Iran accord collapses, oil prices could spike dramatically, creating inflationary pressures and economic headwinds throughout Southeast Asia. The cancelled Switzerland talks and Israeli operations against Lebanon suggest that the path forward remains far from assured, with multiple flashpoints capable of derailing the fragile peace arrangement. Traders and policymakers across Asia will monitor each development closely, knowing that Middle East stability directly affects their own economic fortunes.
