Crude oil futures have dropped to their lowest levels since mid-April, driven by expectations that the U.S. and Iran are nearing a preliminary agreement, which reportedly includes reopening the Strait of Hormuz. Following prolonged uncertainty over the status of a potential 60-day extension to the current ceasefire—during which discussions on Iran's nuclear program would continue—the U.S. President indicated in a social media post Friday morning that he would make a "final decision" on the deal. Iran's Fars News Agency stated that the agreement calls for Iran to open the strait without restrictions, though Iranian officials, after insisting on regulating traffic including imposing transit fees, said the waterway would reopen "according to its own pre-determined arrangements."
Alan Suderman of StoneX noted, "Fund flows are trading on the 'risk' of a possible peace deal over the weekend, with money broadly exiting energy, grain, and oilseed markets. Traders will be closely watching headlines throughout the weekend to see if they continue this trend or reverse it come Sunday night."
However, as the conflict enters its third month, Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets, warned in a report, "The global energy buffer is being rapidly eroded, and time is running out to reopen the strait and prevent a 'hard landing' for oil prices."
Chevron CEO Mike Wirth highlighted in an interview that recent attacks on several vessels transiting the Strait of Hormuz underscore the "very real" risks that Persian Gulf shipowners face, regardless of any peace deal. "Kinetic activity (military conflict) has continued this week, some reported, some not," Wirth said, adding, "But the market psychology is that this is closer to the end than the beginning."
On Friday, the front-month July NYMEX crude oil futures contract fell 1.7% to settle at $87.36 per barrel, while the front-month July Brent crude futures contract dropped 1.8% to $92.05 per barrel. Both benchmarks marked their lowest closing prices since April 17. For the week, WTI crude plunged 9.6%, its steepest weekly decline in six weeks, and Brent crude tumbled 11.1%, its worst weekly performance in seven weeks.
Additionally, the front-month July NYMEX natural gas futures contract closed nearly unchanged, edging up 0.1% to $3.290 per million British thermal units (MMBtu), reaching its highest settlement since February 6.
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