Oil prices edged lower on Friday as investors weighed the possibility of a ceasefire between the US and Iran against continued risks to energy infrastructure in the Middle East. The move followed a volatile week in which crude prices reacted sharply to diplomatic developments and concerns over potential disruptions to global supplies.

Brent and WTI Respond to Ceasefire Hopes

Brent crude futures fell 74 cents, or 0.69%, to $105.85 a barrel, while WTI futures declined 81 cents, or 0.86%, to $93.80 a barrel. The move came after both benchmarks rallied sharply on Thursday, with prices rising as much as 5% during the session. Brent ultimately closed Thursday 3.4% higher, while WTI gained 2.7%.

Despite the recent recovery, WTI remained down 6.42% for the week after six consecutive sessions of declines in which it lost 13%. Brent, by contrast, was up 2.09% for the week. The divergence reflects differences in how the market is assessing supply risks and regional disruptions affecting crude flows.

The Strait of Hormuz Remains Central to the Outlook

Energy markets are closely monitoring talks between US and Iranian representatives in New York, where a potential framework for ending the conflict is being discussed. A possible agreement could involve Iran reopening the Strait of Hormuz alongside the removal of US economic restrictions. Such an outcome could reduce the geopolitical risk premium embedded in crude prices and improve energy flows across the region.

However, the market is not yet pricing in a rapid return to normal conditions. The Strait of Hormuz remains a critical route for global oil and gas shipments, meaning any delay in reopening the waterway or a renewed escalation could quickly revive concerns about supply disruptions. Saudi Arabia is also continuing to face threats to its energy infrastructure.

Infrastructure Attacks Limit the Downside

Iran-backed Houthi forces remain a source of risk for regional infrastructure and export routes. Saudi Arabia said it intercepted six ballistic missiles launched from Yemen, with threats targeting areas in the south of the country and Yanbu on the Red Sea coast. Saudi Arabia has increased oil flows through the East-West pipeline to Yanbu, but crude loadings on tankers have yet to fully resume.

For the oil market, the implication is that diplomatic progress alone may not be enough to remove the risk premium. Even if a ceasefire is reached, investors will need to see an actual improvement in tanker traffic, flows through the Strait of Hormuz and the ability of regional producers to restore stable export operations.

Going forward, attention will remain focused on US-Iran talks, the status of the Strait of Hormuz and the extent of damage to Saudi oil infrastructure. For global energy markets, the key question is whether diplomatic developments translate into a meaningful increase in available oil supply, or whether threats to infrastructure and shipping routes continue to keep crude prices elevated and volatility high.