Oil prices extended losses on Friday after U.S. President Donald Trump canceled planned strikes on Iran, a move that reduced near-term fears of a wider military escalation following tit-for-tat actions earlier in the week.
Brent crude futures fell $1.21, down 1.3%, to $89.17 a barrel at 0042 GMT. U.S. West Texas Intermediate (WTI) dropped $1.23, or 1.4%, to $86.48. For the week, Brent declined 4.2% while WTI was down 4.4%, reflecting a pullback from heightened risk premiums that had supported prices earlier in the period.
President Trump, who had warned he would strike Iran "very hard," said on Thursday that he had called off the planned strikes, noting that discussions with Iran had progressed. Iran’s semi-official Fars news agency, however, reported that Tehran had not approved the text of any agreement.
Market participants reacted quickly to the change in tone from Washington. "While this could, of course, be yet another false dawn, the market’s reaction has been both swift and decisive," said IG market analyst Tony Sycamore, characterizing the immediate downward move in oil prices.
Earlier in the week, Iran announced the closure of the Strait of Hormuz and warned that any vessel attempting to pass would come under fire. The months-long blockade of the strait, which typically carries a fifth of global oil and liquefied natural gas shipments, had been a key factor keeping oil prices elevated.
Despite Iran’s declaration, the U.S. military reported on social media that commercial ships continued to transit the waterway, indicating continued movement of maritime traffic through the chokepoint.
Even as prices corrected lower, some market watchers highlighted that near-term upside risks remain if key technical support holds. "As long as the price can hold above support in the low $80s, the risks remain firmly skewed to the upside," Sycamore said, pointing to the potential for renewed strength if that level is sustained.
Context and market reaction
The combination of a high-profile call-off of military action and conflicting statements from Tehran helped reduce an immediate premium for geopolitical risk in oil. The week-to-week declines in Brent and WTI reflect that reduced risk premium, though analysts continue to monitor developments closely.
Outlook
With the situation fluid, price direction will depend on whether diplomatic discussions progress and whether Iran or other parties take further actions that could alter supply expectations. For now, the market has moved to price in a lower likelihood of an immediate large-scale disruption.