Oil prices climbed on Friday as fresh U.S.-Iran clashes jeopardized the fragile ceasefire and dimmed hopes of reopening the Strait of Hormuz, a critical energy shipping lane.
Brent crude futures were up 67 cents, or 0.67%, at $100.73 a barrel by 06:50 GMT. West Texas Intermediate (WTI) U.S. crude futures rose by 45 cents, or 0.47%, to $95.26 a barrel. The benchmarks were up more than 3% at the market open.
The gains snapped three days of decline on reports this week that the U.S. and Iran were close to agreeing to a peace deal that would end the fighting but put off larger issues around Iran’s nuclear program.
For the week, both contracts are still set to fall about 6%. “The market is on the cusp of a complete breakdown,” said Vandana Hari, founder of oil market analysis provider Vanda Insights. “Price formation is no longer anchored in a pragmatic reading of the war’s trajectory or the physical realities in the Strait of Hormuz.”
Friday’s jump in prices followed Iran’s accusations that the U.S. violated their month-long ceasefire, while the U.S. said its strikes were retaliatory after Iran fired on U.S. Navy vessels transiting the Strait of Hormuz on Thursday.
Iran’s military said the U.S. had targeted an Iranian oil tanker and another ship, as well as civilian areas in the Strait and on the mainland.
Despite the renewed combat, U.S. President Donald Trump told reporters later on Thursday the ceasefire was still in effect.
“The U.S. administration continues to oversell the prospects of a thaw, and an optimism-biased market buys into it,” Vanda Insights’ Hari said.
“Curiously, each time, the rebound is gradual and incomplete, making the head fakes at least somewhat effective.”
The exchange of fire happened as Washington awaited Iran’s response to the latest peace proposal, which did not tackle contentious issues such as the U.S. demand to reopen the Strait of Hormuz, a conduit for a fifth of the world’s oil and LNG supplies, before the war began on February 28.
“On the supply front, the picture remains tight,” IG analyst Tony Sycamore said in a note.
The U.S. Commodity Futures Trading Commission is investigating oil price trades totalling $7 billion ahead of key Iran war-related announcements by Trump, Reuters reported on Thursday.
The majority of the trades were bearish bets on falling prices, executed on the ICE and CME exchanges ahead of Trump’s announcements, including attack delays, the ceasefire, and Iran policy shifts, that triggered drops in oil markets.
WHAT YOU SHOULD KNOW
The U.S.-Iran conflict remains the dominant force driving oil market volatility.
Despite talk of a ceasefire, renewed clashes have reignited supply fears, particularly around the Strait of Hormuz, through which a fifth of the world’s oil and LNG flows.
Until a credible, lasting peace deal is reached, oil prices will remain unpredictable and heavily reactive to every development in the conflict.
