Global oil prices experienced a sharp decline on Friday, reaching levels not seen since the early stages of the Iran crisis, following U.S. President Donald Trump's assertion that he was nearing a peace agreement with Tehran.
The price of Brent crude began to fall from approximately $93 per barrel during overnight trading after Trump called off further military strikes against Iran that had been planned for the evening. On Friday morning, it briefly dropped below $85 per barrel amid renewed optimism that a deal between the U.S. and Iran could lead to the reopening of the Strait of Hormuz over the weekend. Later, it was trading at around $87.50, representing a 3% decline for the day.
However, the price subsequently climbed back above $89 after Trump dismissed Iranian reports about an imminent deal, stating that the terms described bore "no relation to the truth."
Trump had called off his plan for renewed strikes late on Thursday, indicating that talks with Iran had progressed and that a peace deal could result in the reopening of trade through the Strait of Hormuz as early as this weekend. Tehran stated that it had not made a final decision but that large parts of the agreement had been finalized.
"Headlines are driving the market once again, as confidence grows that an eventual deal will be struck and the strait reopens," said Tamas Varga, an analyst at PVM Oil Associates.
The oil market slump has brought prices to the lowest point since early March, when Iran effectively blocked shipments of oil and gas from leaving the Gulf following U.S.-Israeli strikes on Tehran. The chokehold on this vital trade route caused oil prices to quickly reach highs of $113 per barrel before members of the International Energy Agency coordinated the release of 400 million barrels of emergency crude to calm the market. Before the conflict began, Brent crude was trading at about $70 per barrel.
Oil prices have been declining in recent weeks due to a combination of factors that have helped rebalance the market, including import cuts from China and the emergence of stealth crude exports from the Gulf via "dark transits."
Chris Beauchamp, chief market analyst at IG, commented: "The usual pesky caveats about details and signing remain of course, but if the two sides could actually come to an agreement that reopens Hormuz, that would provide the perfect boost for a stock market rally that was beginning to look more than a little tired."
European markets followed Asia higher on Friday, with the pan-European Stoxx 600 index up 1.5%.
Goldman Sachs, one of the most influential players in the global oil market, stated on Friday that it still expects oil prices to average $90 per barrel in the last quarter of the year, as oil flows gradually normalize from August and countries replenish their depleted stockpiles. However, the U.S. investment bank has lowered its oil price forecast for 2027 by $5 to $80 per barrel, citing higher expected supplies from the Americas and the UAE, as well as lower forecast demand.
