Oil prices moved lower on Friday, but the market was still heading for a strong weekly gain after crude climbed above $100 a barrel for the first time in months.
Brent crude oil futures, the global benchmark, fell 2.3% to $105.15 a barrel. U.S. West Texas Intermediate was down 2.73% at $99.68 per barrel. On Thursday, Brent touched roughly $108 a barrel, while WTI rose above $104.
The pullback followed a report from Iranian state media saying Tehran would meet Gulf states in Oman to discuss the Strait of Hormuz, suggesting some diplomacy is still under way despite a week of sharp escalation.
Even with Friday’s decline, Brent was still on course for a 9% weekly gain and was set to finish the week above the key $100 level. WTI was up 8.9% for the week. The drop ended a five-day winning streak for Brent and an eight-day run of gains for WTI.
Markets are continuing to price in the risk of a prolonged war with Iran as the Middle East conflict intensifies. Investor sentiment was also shaped by a Wall Street Journal report saying senior White House advisers had discussed with President Donald Trump the possibility that hostilities could last beyond his current term.
Trump has said the conflict will end after the U.S. midterm elections and that oil and gas prices will also fall after the key November vote.
In a Friday morning note, Deutsche Bank’s Jim Reid said geopolitical fears were once again driving the market. He pointed to rising concerns over Red Sea shipping safety and the possible knock-on effect on Saudi oil exports after Houthi rebels captured Yemen’s port city of Mokha, near the Bab el-Mandeb Strait. He also said sentiment was hurt by news that Saudi Arabia’s oil output had fallen to its lowest level since 1990.
Tamas Varga, an analyst at PVM Oil Associates, told CNBC that the key question for investors is whether the current supply deficit is structural or temporary. In his view, further price spikes cannot be ruled out, and a return to the April peak of $126 remains possible as global and regional oil inventories continue to decline. At the same time, he warned that the higher oil prices rise, the more demand destruction will follow.
Varga said the difference between the current crisis and the one seen in 1990 during the first Gulf War is that oil is far more elastic today than it was 35 years ago. He added that renewable energy is already “more than capable” of replacing “certain parts of the barrel,” especially in power generation.
According to Varga, it is only a matter of time before the gap between global oil supply and demand narrows, either through higher supply in the event of a truce or through weaker demand as alternative energy sources are used more widely. In the meantime, further strength in oil prices remains possible, but he said it would be surprising if that lasted beyond 2026.
Correction: U.S. West Texas Intermediate was down 2.75% to $99.66 per barrel. An earlier version misstated the direction of the price.
