Brent climbs US$1 on uncertainty over end to Iran war

Brent crude oil prices surged by more than $1 a barrel on Friday (Aug 7), rising by $1.06, or 1.3 percent, amid ongoing uncertainty surrounding negotiations aimed at resolving the conflict and reopening the vital Strait of Hormuz. West Texas Intermediate (WTI) futures also gained, closing at $78.18 a barrel, up $0.89, or 1.15 percent.

Oil futures experienced a more than $3 increase on Thursday as Iran deliberated a bill to prohibit US and Israeli vessels from traversing the strategic waterway, which typically facilitates about one-fifth of global oil and liquefied natural gas shipments prior to the February war's conclusion. Oil prices had previously declined during the week as a potential resolution to the conflict appeared more probable, contributing to a persistent on-again, off-again pattern since the US and Israel jointly attacked Iran in late February, triggering a conflict that has now entered its sixth month.

Brent crude futures were poised for a weekly decline surpassing 8 percent, while WTI futures were expected to decline over 7 percent. While the market sentiment oscillated wildly this week due to the potential deal's prospects, traders remain uncertain about the specific conditions required to finalize the agreement, according to Vandana Hari, founder of oil market analysis provider Vanda Insights.

Experts assert that hostilities between Iran and the US have not yet concluded, with Iran demanding a fee of 5 to 7 percent of the cargo price for ships utilizing the strait, a senior Iranian official disclosed. Oman is deliberating on a fee of around 3 percent, while Washington is advocating for no fees. The ongoing dispute could strain commercial reserves further as the supply disruption persists.

Both Iran and Oman have reportedly agreed on the route ships must take through the strait, which lies between their nations. However, it remains unclear if the US will agree to these terms. The proposed deal faces significant challenges due to US sanctions and restrictive insurance clauses on payments. US President Donald Trump may face substantial political backlash domestically if he accepts the agreement.

Analysts emphasize that the unresolved situation surrounding the war's end and its timeline continues to heighten traders' anxiety.