Oil prices declined sharply on Friday, with Brent crude falling to its lowest level since early March and WTI reaching its lowest level since mid-April, as growing optimism surrounding a potential U.S.-Iran peace agreement reduced concerns about prolonged supply disruptions in the Middle East.
Brent crude settled at $87.33 per barrel, down $3.05 or 3.37% on the day, while West Texas Intermediate (WTI) crude settled at $84.88 per barrel, down $2.83 or 3.23%.
Market sentiment weakened after reports indicated that a memorandum of understanding between the United States and Iran could be signed as soon as this weekend. While Iranian officials stated that no agreement has yet been finalized, expectations for a diplomatic resolution continued to build following President Trump’s decision to cancel planned military strikes against Iran earlier in the week.
Despite the decline in prices, concerns remain regarding global oil inventories and supply availability. The Strait of Hormuz remains heavily restricted, limiting the movement of crude oil and liquefied natural gas shipments that normally account for roughly 20% of global energy trade. Analysts noted that even if an agreement is reached, restoring normal shipping operations and rebuilding inventories will likely take time.
Several market observers warned that inventory levels remain historically tight and could continue to decline during the summer demand season if oil flows do not normalize soon. However, optimism surrounding a potential reopening of the Strait of Hormuz and easing geopolitical tensions outweighed those supply concerns during Friday’s trading session.
Separately, OPEC lowered its forecast for global oil demand growth in 2026 for a second consecutive month, citing weaker economic activity and softer consumption expectations. Goldman Sachs also reduced its longer-term oil price outlook, reflecting expectations for increased supply growth and moderating demand.