Oil output steadied as tensions in the Middle East flared while traders monitored progress towards a deal between Iran and Oman to restore shipping through the Strait of Hormuz.
Brent settled above $83 a barrel, though still notched a third straight weekly loss. Futures have been highly sensitive to headlines around the terms and timing of a potential pact on the waterway that could restore millions of barrels of Middle Eastern supply.
Oil reversed gains in post-settlement trading after Reuters reported that the US will lift its naval blockade on Iran once the Iran-Oman deal is reached and commercial shipping is restored “without impediments.”
The US has redirected 49 commercial vessels in the waterway since its blockade against Iran resumed, US Central Command said on Thursday. A lifting of the blockade could return a significant volume of oil to the market and potentially pave the way for a full resumption of flows through Hormuz.
Even as a resolution for the waterway appeared more imminent, threats to shipping persisted. Abu Dhabi National Oil Co. said three of its vessels were attacked while transiting Hormuz this week.
According to the semi-official Fars News Agency, prices were already up earlier following a report that Iran attacked “hostile targets” in the strait on Thursday following explosions near Qeshm Island in Hormuz. Some Iranian politicians have been advocating provisions that would bar US and Israeli vessels from the waterway and a fee structure, Fars reported. Such conditions would clash with Washington’s demand for free passage and a return to the pre-war status quo.
Meanwhile, US President Donald Trump reiterated that he thinks the war will end “pretty soon” and things are “moving along good” on the strait.
“Deals to reopen the Strait of Hormuz remain elusive, with investors teetering in the balance,” said Rob Haworth, senior investment strategy director at US Bank Wealth Management. “For now, traffic remains low and the path to a durable deal remains unclear.”
The conflict in the Middle East also appears to be widening, with Iran-backed Houthis saying they conducted a “large-scale” attack against forces from Yemen’s Saudi-aligned government. The militant group earlier this week claimed to have attacked a Saudi tanker in the Gulf of Aden and threatened shipping in the northern Red Sea.
Elsewhere, the US Senate passed a sweeping new Russia sanctions bill authorising punishing tariffs on China, India and other top buyers of the country’s oil and gas as well as extended Iran sanctions.
