Oil prices fell on Friday after Israel and the Iran-backed Hezbollah movement agreed to a ceasefire, easing concerns over potential disruptions to energy supplies in the Middle East.
International benchmark Brent crude futures for August delivery dropped 1 percent to US$79.02 per barrel, reversing earlier gains, while U.S. West Texas Intermediate crude for July fell 0.8 percent to US$75.96 per barrel. Both benchmarks were on course for weekly losses of around 8 percent.
A U.S. official told CNBC that the ceasefire between Israel and Hezbollah took effect at 4 p.m. local time (0900 GMT), reducing fears that regional hostilities could threaten critical oil infrastructure and shipping routes.
The decline in prices came despite signs of uncertainty surrounding broader diplomatic efforts involving Washington and Tehran.
Switzerland’s foreign ministry said planned talks between the United States and Iran at Bürgenstock had been called off, raising questions about the future of negotiations aimed at turning a temporary understanding between the two sides into a lasting agreement.
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The White House also announced that Vice President JD Vance would no longer travel to Switzerland, citing unresolved logistical issues related to the negotiations.
Nevertheless, U.S. officials signaled that tensions in the Gulf had eased. Speaking to reporters on Thursday, Vance said Iran had refrained from targeting vessels transiting through the Strait of Hormuz for a second consecutive night.
“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.”
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According to Vance, tankers carrying more than 12 million barrels of oil successfully crossed the strategic waterway overnight.
The Strait of Hormuz is one of the world’s most important energy chokepoints, handling a significant share of global crude oil and liquefied natural gas shipments. Any threat to shipping in the area typically triggers sharp movements in oil markets.
Market sentiment was also influenced by comments from the Organization of the Petroleum Exporting Countries (OPEC), whose Secretary General, Haitham Al Ghais, dismissed forecasts suggesting global oil demand could soon peak.
In an interview with CNBC, Al Ghais said OPEC remained focused on market fundamentals and did not expect oil demand to reach its highest point in the foreseeable future.
“[We focus] on fundamentals and not putting many ifs and buts in our forecasts, but rather focusing on actual numbers,” he said.
Al Ghais also rejected projections by the International Energy Agency that point to a future surplus in oil supplies, highlighting ongoing differences between major energy institutions over long-term demand trends.
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Despite the diplomatic uncertainties, traders appeared encouraged by the ceasefire agreement and the absence of major disruptions to shipping through the Strait of Hormuz, helping push oil prices lower at the end of a volatile week.
