Oil prices retreated on Friday, poised to end a two-week rally.
During Asian trading hours on Friday, Brent crude fell by 25 cents, or 0.3%, to $89.45; WTI crude fell by 22 cents, also down 0.3%, to $83.31. Despite closing higher in the previous session on reports that the U.S. was unwilling to reinstate previous terms of the Iran agreement, both major benchmarks were still on track to end their consecutive two-week gains.
For the full week, Brent crude accumulated a loss of 5.3%, while WTI fell 4.3%. This indicates that while the market continues to price in Middle East supply risks, it has not directly equated geopolitical tensions with supply disruptions. The previously accumulated risk premium has been partially unwound in the absence of concrete evidence of supply cuts.
U.S. Refusal to Restore Old Deal, Stalled Negotiations Support Risk Premium
Citing informed sources, The Wall Street Journal reported that the Trump administration has repeatedly told mediators it has no intention of restoring the original terms of the June memorandum of understanding, making efforts to push for renewed U.S.-Iran negotiations more difficult. The U.S. also stated on Thursday that Washington is not currently negotiating with Iran, despite other countries' attempts to bring the two sides back into contact.
On Monday this week, the U.S. announced what it called its "toughest-ever sanctions" on Iran. Iran described these measures as "inhumane and hostile actions" that have already lost their effect. The sanctions and the negotiation impasse maintain market concerns about Middle East supply, but the oil price movement suggests traders are still waiting to see whether the sanctions actually impact exports and whether risks in the Strait of Hormuz escalate into actual shipping disruptions.
Russia-Ukraine Tensions Escalate, But Market Still Distinguishes Threat from Actual Output Cuts
Other geopolitical risks are also increasing. Moscow warned it could strike British military targets inside and outside Ukraine if Kyiv continues to use UK-supplied long-range cruise missiles to attack Russian territory. However, Trump downplayed the possibility of Russia attacking a NATO country, saying Putin would not launch an attack on a NATO member state.
Therefore, current oil prices are being pulled by two opposing forces: the U.S.-Iran stalemate, sanctions, and the Russia-Ukraine escalation provide downside price support; on the other hand, the market has not seen sufficiently clear new supply losses, leading to profit-taking following the gains of the previous two weeks, which continues to weigh on prices. Whether WTI can firmly regain ground near $84 depends on whether geopolitical threats translate into quantifiable export or shipping losses; if risks remain at the rhetorical level, the weekly correction may continue.
