Oil markets regained some ground on Friday as traders reassessed the probability of a near-term diplomatic breakthrough between Washington and Tehran, reversing part of the sharp selloff seen earlier this week when optimism surrounding negotiations briefly pressured crude prices lower.

Brent crude futures rose roughly 1.1% to trade near $103.75 per barrel, while U.S. West Texas Intermediate crude gained around 0.5% to approximately $96.87. Earlier in the trading session, both benchmarks had rallied more than 3% before giving back part of those gains as investors continued reacting to conflicting geopolitical headlines.

Although crude prices remain on track for weekly declines of more than 5% for Brent and roughly 8% for WTI, the broader energy market remains highly unstable as uncertainty surrounding the Iran conflict continues reshaping inflation expectations, global trade flows, and monetary policy forecasts.

Diplomatic Signals Fail to Convince Energy Markets

Investor sentiment shifted throughout the week as multiple diplomatic developments pointed simultaneously toward both progress and continued deadlock in negotiations.

A senior Iranian source told Reuters that gaps between the United States and Iran had narrowed, while U.S. Secretary of State Marco Rubio recently acknowledged “some good signs” in the talks. Meanwhile, a Qatari negotiating delegation reportedly arrived in Tehran in coordination with Washington to support mediation efforts.

However, core disputes remain unresolved, particularly regarding Iran’s uranium stockpile and future control mechanisms surrounding the Strait of Hormuz, one of the world’s most strategically important oil shipping routes.

The market increasingly appears reluctant to fully price in a rapid peace agreement after several previous diplomatic breakthroughs failed to produce lasting progress. Traders are now balancing hopes for eventual de-escalation against the growing reality that physical supply disruptions could remain severe even under an eventual ceasefire scenario.

Supply Disruptions Continue to Pressure Global Inventories

Energy analysts warn that the supply impact from the conflict is already becoming deeply embedded across global oil markets.

Before the war, roughly 20% of global energy supplies moved through the Strait of Hormuz. The conflict has since removed an estimated 14 million barrels per day from global oil flows, including exports from major producers such as Saudi Arabia, Iraq, Kuwait, and the United Arab Emirates.

PVM Oil Associates analyst Tamas Varga said the market remains trapped between optimism surrounding diplomacy and the harsh reality of rapidly tightening inventories.

“The optimism of a relatively imminent truce and bearish rhetoric whenever Brent approaches $110 prevents oil prices from rallying significantly higher,” Varga noted.

At the same time, officials across the Gulf region continue warning that a full restoration of normal export flows may take far longer than investors initially expected.

The head of UAE state energy giant ADNOC recently stated that complete normalization through the Strait may not occur before early 2027, even if hostilities end immediately.

Inflation Risks and OPEC+ Decisions Remain in Focus

Elevated energy prices are now increasingly feeding into broader inflation concerns across developed and emerging economies.

BMI, a unit of Fitch Solutions, raised its average 2026 Brent crude forecast to $90 per barrel from $81.50 previously, citing supply shortages, infrastructure damage, and prolonged recovery timelines across Gulf energy networks.

Meanwhile, OPEC+ producers are preparing for their upcoming June 7 meeting, where several member countries are expected to support a modest production increase despite continuing regional disruptions.

China’s refined fuel export strategy is also drawing attention as Beijing moves cautiously to protect domestic energy demand amid ongoing uncertainty in global supply chains.

Looking ahead, oil markets are likely to remain highly sensitive to every geopolitical headline tied to the U.S.-Iran negotiations. Even if diplomatic progress continues, investors increasingly recognize that repairing damaged infrastructure, rebuilding inventories, and restoring stable trade flows could take many months, leaving energy prices vulnerable to continued volatility well beyond the immediate conflict.