Oil prices fell more than 1% Friday as traders weighed a potentially major diplomatic development in the Middle East: U.S. and Iranian negotiators are exploring a phased path out of the conflict that could include reopening the Strait of Hormuz.
Brent crude was down $1.34, or 1.3%, at $105.26 a barrel at 12:15 GMT, while West Texas Intermediate fell $1.83, or 1.9%, to $92.78. Brent remained up 1.5% for the week, while WTI was down 7.4%.
Sources close to the negotiations told Reuters that talks in New York are examining a framework under which Tehran would reopen the Strait of Hormuz and Washington would lift its economic blockade of Iran. The negotiations have not produced a final agreement, and the prospective terms remain subject to change.
The potential reopening matters because disruption to shipping through the Strait has constrained Gulf energy flows and contributed to a substantial geopolitical premium in crude prices.
Supply risks remain substantial. Houthi attacks against Saudi Arabia continue, keeping markets alert to possible disruption at one of the world’s largest oil exporters.
The market is therefore pricing two opposing forces: the possibility of diplomatic de-escalation and continued physical threats to regional energy infrastructure.
The Brent-WTI spread widened to its largest since May, underscoring the unusual divergence between international and U.S. crude-market conditions.
The next catalyst is whether negotiations produce a verifiable agreement affecting Hormuz traffic. Until then, crude prices remain highly exposed to both diplomatic developments and further attacks on Gulf energy infrastructure.
