WASHINGTON (dpa-AFX) - Crude oil prices have slumped on Friday, extending the losses from yesterday's session as confidence on reopening of the Strait of Hormuz in the coming days persists following announcements of an Israel-Lebanon ceasefire and progress in U.S.-Iran talks.
WTI Crude Oil for July month delivery was last seen trading down by $2.97 (or 2.97%) at $90.07 per barrel.
The U.S.-Israel versus Iran war entered day number 98 today.
Expectations of an easing of tensions in the Middle East continue since yesterday as investors welcomed the announcements of an Israel-Lebanon ceasefire as well as progress in the ongoing U.S.-Iran talks with positivity.
In a joint statement issued on Wednesday, the U.S., Israel, and Lebanon announced that Israel and Lebanon have agreed to halt their mutual strikes and renew a previous ceasefire they consented to in April which was violated later by both the nations.
In a month's time, both nations will strike a comprehensive deal to end their decades-long hostilities.
However, the ceasefire is contingent on a complete cessation of Hezbollah militant group's firings as well as the evacuation of all Hezbollah operatives from the South Litani Sector.
In addition, Lebanon should create pilot security zones where Hezbollah group would be banned from entering.
Despite the Iran-backed Hezbollah group rejecting the ceasefire, market participants viewed this development positively.
Yesterday, U.S. President Donald Trump assured that the ongoing U.S.-Iran talks were progressing well.
Trump forecasted that over this weekend, a Memorandum of Understanding between both the nations could be signed and the Strait of Hormuz will reopen soon after the deal is made.
Trump brushed aside the recent skirmishes in the gulf region between the U.S. and Iran as insignificant.
Iran's Foreign Minister Abbas Araghchi confirmed that all channels for communication with the U.S. are open and talks are going on.
Today, the adviser to Iran's Supreme Leader Mojtaba Khamenei, Mohsen Rezaei stated that the negotiated Memorandum of Understanding contains 'ambiguities' that await clarification.
Meanwhile, the Islamic Revolutionary Guards Corps announced that the Iranian Navy fired warning shots using missiles and drones toward U.S. destroyers operating in the Sea of Oman, forcing U.S. Naval assets to leave the area.
According to the IRGC, the operation was carried out to prevent U.S. fleet's interference in the region.
U.S. Central Command denied its ships being either attacked or fired though.
In an interview with CNN, President of Lebanon Joseph Aoun criticized Iran meddling into Lebanon's issues.
Condemning Iran's usage of Lebanon as a a bargaining chip in U.S.-Iran talks as unacceptable, Aoun urged Hezbollah to comprehend the reality and resort to solve problems through diplomacy.
Confidence among market participants about a quicker end to supply disruption concerns prevailing due to the closure of the Strait of Hormuz weighed on oil prices.
Oil price's rise has been restricted since the world's largest crude oil importer China has substantially reduced its oil purchases recently, according to industry estimates.
With limited information on China's inventory, data from various energy research firms suggest that China is utilizing the stockpiles it had accumulated when prices were lower and is now drawing down on those inventories.
Oil shipments entering China have decreased to 7.5 million barrels per day from roughly 13 million bpd a year before. In addition, the nation has reduced exporting refined products like diesel and jet fuel.
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