Oil prices continued their decline on Friday, with supply concerns easing despite a tanker attack near the strategic Strait of Hormuz.
A key factor in the market's movement was the confirmation by a U.S. official that Iran was behind the assault on a merchant vessel off the coast of Oman.
This incident, coupled with renewed tensions between the U.S. and Iran over the usage of unfrozen funds, has kept the geopolitical risk premium in the Middle East elevated.
Adding to the market's bearish sentiment are reports that Iraq, the second-largest producer in the OPEC+ alliance, is considering exiting the group, following the United Arab Emirates' departure in May.
Numerous tankers and cargo ships were anchored off the coast of Port Qaboos in Oman.
Despite the attack in the Gulf of Oman, the outflow of numerous tankers from this critical chokepoint helped alleviate immediate supply fears, contributing to the day's price drop.
The Intercontinental Exchange's Brent crude futures for August delivery were last quoted at $72.57 per barrel, down 3.6%.
U.S. West Texas Intermediate crude for August fell 3.6% to $69.28 per barrel, officially breaching the $70 threshold.
Investors are closely monitoring developments in the Middle East, assessing whether recent diplomatic efforts can mitigate the risk of disruptions to crude supply chains, which is weighing on prices.
A U.S. official stated that the attack on the vessel near Oman's coast in the Strait of Hormuz was orchestrated by Iran. The ship involved was sailing under a Singapore flag.
The United Kingdom Maritime Trade Operations office reported no casualties or pollution from the incident.
The Secretary-General of the International Maritime Organization stated that while a ship evacuation plan had been initiated and several vessels successfully withdrawn, the plan is now temporarily suspended to re-verify the safety of all listed and regional vessels.
Simultaneously, Middle East tensions remain high as the U.S. and Iran disagree on how unfrozen funds under a bilateral memorandum of understanding should be used.
Iran's parliamentary speaker refuted the U.S. administration's claim this week that Tehran's unfrozen overseas assets could only be used to buy American agricultural products.
The U.S. insists all usage of the unfrozen funds must receive American approval.
An American official reiterated that, as announced by the Vice President, the unfrozen Iranian assets are designated solely for purchasing U.S. farm goods to ensure food security for the Iranian people.
The President of a market analysis firm commented on a financial program that the interim agreement leaves many questions unanswered, suggesting the market is overly optimistic as core disputes remain unresolved, and a potential blockade of the strait by Iran could severely impact the global energy economy.
Following the UAE's exit from OPEC in May, the cartel faces another potential departure from a major member.
Iraq, OPEC's second-largest oil producer, has requested a higher production quota and hinted it might leave the organization if its demands are not met.
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