Global oil prices fell further on Friday, extending losses from the previous session after U.S. President Donald Trump called off planned military strikes against Iran, easing fears of a wider escalation in tensions between the two countries.
Brent crude futures declined by $1.21, or 1.3 per cent, to $89.17 per barrel as of 0042 GMT, while U.S. West Texas Intermediate (WTI) crude dropped $1.23, or 1.4 per cent, to $86.48 per barrel.
The downturn also weighed on weekly performance, with Brent recording a 4.2 per cent loss and WTI falling 4.4 per cent over the week.
The market reaction followed Trump’s decision to suspend a proposed military response against Iran after indicating that diplomatic discussions between Washington and Tehran had made progress.
The U.S. president had earlier warned that Iran could face severe military action, but announced on Thursday that planned strikes would not proceed as negotiations continued.
However, uncertainty remains over the prospects of any breakthrough agreement. Iran’s semi-official Fars News Agency reported that Tehran had not approved the text of any proposed deal, suggesting significant differences still exist between both sides.
Market analysts said the development immediately reduced concerns about a broader regional conflict that could threaten energy supplies.
“While this could, of course, be yet another false dawn, the market’s reaction has been both swift and decisive,” IG market analyst Tony Sycamore said.
Despite the easing of immediate military concerns, tensions remain elevated in the region.
Iran on Thursday reiterated its closure of the Strait of Hormuz, warning that vessels attempting to transit the strategic waterway could come under attack. The strait, through which roughly one-fifth of global oil and liquefied natural gas shipments normally pass, remains a critical chokepoint for global energy markets.
Tehran’s months-long restrictions on maritime traffic through the route have been a major factor supporting oil prices in recent months.
However, the U.S. military said commercial shipping activity through the waterway continues despite the threats.
Analysts noted that while crude prices have retreated in response to the suspension of planned U.S. military action, underlying geopolitical risks remain significant.
According to Sycamore, oil prices could still rebound sharply if tensions flare up again.
“Even as oil prices correct downwards, as long as the price can hold above support in the low $80s, the risks remain firmly skewed to the upside,” he said.
Investors are expected to closely monitor developments in U.S.-Iran negotiations, as well as security conditions around the Strait of Hormuz, for further direction on global energy markets.
