Oil prices fell Friday after a brief stretch of optimism tied to a ceasefire between Israel and Iran-backed Hezbollah gave way to fresh uncertainty over U.S.-Iran nuclear talks. International benchmark Brent crude futures for August fell 1% to $79.02 per barrel, while U.S. West Texas Intermediate for July dropped 0.8% to $75.96. Both contracts were on track for a weekly loss of around 8%.
According to CNBC, Switzerland's foreign ministry confirmed that U.S.-Iran talks scheduled at Bürgenstock on Friday would not proceed as planned. The White House said Vice President JD Vance was no longer traveling to Switzerland, citing unresolved logistical issues surrounding the negotiations.
The ceasefire itself went into effect at 4 p.m. local time Friday, a U.S. official told CNBC. The agreement followed two nights of calm in the Strait of Hormuz, a waterway that had been a focal point of the conflict. Vance told reporters on Thursday that tankers carrying more than 12 million barrels had crossed the strait overnight. "The Iranians, for the second night in a row, did not shoot at any ships in the Strait of Hormuz," Vance said. "So far, they are honoring their end of the commitment."
Tamas Varga, analyst at PVM Oil Associates, said it appears the conditional reopening of the Strait of Hormuz, along with the lifting of force majeure declarations by Kuwait and the end of the U.S. naval blockade, has convinced investors that the disruption which had pushed prices above $120 "is well and truly over." But Varga also warned that the recent sell-off may not hold. "The 60-day truce is an unambiguously welcome step in the right direction. However, even if the agreement holds, the recent sell-off may prove unsustainable in the short term," he said.
Brent crude is now roughly 36% below its peak during the conflict. Tiago Lacerda, a market analyst at Axi, told CNBC that prices are likely to trade between $75 and $82 a barrel in the near term. He noted that major shipping lines have yet to resume transits through the strait and that insurance rates remain elevated. "Attention shifts quickly to whether the physical reopening actually follows major shipping lines have yet to resume transits and insurance rates remain elevated, suggesting the market is cautious about the speed of normalization," Lacerda said.
Separately, OPEC Secretary General Haitham Al Ghais told CNBC in an exclusive interview that the organization does not expect oil demand to peak in the foreseeable future. He also rejected forecasts from the International Energy Agency pointing to a future supply glut. On how OPEC approaches its projections, Al Ghais said the group focuses "[on] fundamentals and not putting many ifs and buts in our forecasts, but rather focusing on actual numbers."
The combination of the Switzerland cancellation and the ceasefire announcement created conflicting signals for traders on Friday. Prices had gained earlier in the session before reversing once the failed talks were confirmed. Whether the 60-day truce holds and whether physical shipping through the Strait of Hormuz returns to normal will likely shape oil prices in the weeks ahead.
