Crude markets moved higher on Friday, though the rally remained tentative as investors reassessed the viability of a recently announced ceasefire between Washington and Tehran. Brent crude futures climbed 51 cents to reach $80.36 per barrel, representing a 0.64% gain, while US West Texas Intermediate crude advanced more sharply by $1.28 or 1.7% to $77.88 per barrel. Despite the session gains, both contracts remained on track for weekly losses of approximately 8%, reflecting the significant price volatility that has characterised the broader market reaction to Middle East developments in recent days.

The fragility of the peace agreement became apparent when Swiss officials announced that scheduled negotiations between American and Iranian representatives would not proceed as planned on Friday. Vice President JD Vance's decision to abandon his travel arrangements to attend the talks signalled potential complications in translating the interim accord into a durable framework. This diplomatic setback arrived amid heightened tensions in Lebanon, where Israeli military operations against Hezbollah have intensified, creating uncertainty about whether the nascent US-Iran understanding will withstand mounting regional pressures.

Market participants are grappling with competing impulses. Vandana Hari, founder of the Vanda Insights energy analysis firm, observed that crude prices may have found a temporary floor and could resume climbing if the emerging fractures in the US-Iran memorandum of understanding continue to widen. She cautioned that the current geopolitical environment lacks the stability necessary to reassure traders about sustained normalisation of shipping through the Strait of Hormuz, a critical waterway that channels roughly one-fifth of global petroleum and liquefied natural gas exports.

Thursday's developments offered a glimpse of the potential scale of supply disruption at stake. Both oil benchmarks fell to their lowest levels since early March on reports that multiple tankers, including three vessels flagged under Saudi ownership and carrying a combined 6 million barrels of crude, transited the strategic strait following the signing of the interim accord between the Iranian and American presidents. This movement suggested that market participants were beginning to price in the benefits of restored regional stability.

The prospective supply surge from a lasting peace settlement could prove substantial. Industry analysts estimate that a genuine resolution of the US-Iran conflict could unleash more than 85 million barrels of crude currently stranded in the Persian Gulf region. Beyond this, the anticipated lifting of American sanctions on Iranian oil exports would further expand global supply, potentially exerting downward pressure on prices over the medium term. This supply-side dimension explains why crude markets have weakened significantly since the initial peace announcement, despite traditional geopolitical risk premiums.

However, traders remain in a wait-and-see posture regarding the permanence of these developments. Tim Waterer, chief market analyst at KCM, noted that market participants are seeking concrete evidence that vessel movements through the Strait of Hormuz are genuinely returning to normalcy before committing capital to the next phase of potential price decline. This hesitancy reflects hard-earned experience with Middle Eastern peace initiatives that have unravelled or proven ephemeral. The August contract for WTI crude, which attracts more active trading, moved up 59 cents to $76.44 per barrel, suggesting some underlying bid into forward months despite current weakness.

Regional oil producers have begun positioning themselves for a potential supply normalisation. Kuwait Petroleum Corporation announced on Thursday that it has immediately rescinded all force majeure declarations that were issued during the period of conflict, clearing the way for resumed crude exports. This administrative action signals confidence, at least among Gulf state energy officials, that the disruption may be transitioning towards resolution. Iraq's Oil Minister Basim Mohammed similarly indicated that his country's oilfields are prepared to restore production, with output anticipated to gradually climb back towards pre-conflict levels.

Yet these optimistic preparations now stand clouded by the deteriorating situation in Lebanon. Israel's intensifying military campaign against Hezbollah introduces a fresh variable that threatens to destabilise the delicate understanding between Washington and Tehran. The durability of any peace accord depends substantially on whether Iran perceives the agreement as serving its strategic interests or whether continued Israeli military operations against Iranian proxies will prompt Tehran to abandon the framework altogether. This unpredictability has injected volatility into oil trading and explains why prices have oscillated sharply over recent sessions.

The stakes for global energy markets are genuinely significant. Should the US-Iran truce hold and expand into a comprehensive settlement, the reintroduction of Gulf oil supplies could meaningfully reshape the outlook for crude pricing and broader energy economics. Malaysian and Southeast Asian importers, which depend on stable and affordable energy supplies for manufacturing competitiveness and economic growth, stand to benefit substantially from sustained peace. Conversely, renewed conflict would reimpose supply constraints and elevated risk premiums that would ripple across regional economies dependent on energy-intensive industries.

Market analysts are essentially pricing in scenario risk at present, holding positions lightly until clearer signals emerge about the durability of the diplomatic framework. The absence of hard evidence regarding sustained normalisation of Hormuz transit traffic has compelled traders to adopt a cautious stance, notwithstanding the theoretical benefits of a lasting peace agreement. This dynamic explains the weekly losses alongside intraday strength, as investors balance bullish medium-term supply expectations against bearish near-term uncertainty.