Oil prices fell on Friday but remained on course for their first weekly close above $100 a barrel since mid-May, while US diesel prices reached a record high as attacks on major Middle East shipping routes increased concerns over prolonged supply disruptions.
Brent crude futures fell $1.65, or 1.53%, to $105.98 a barrel, while US West Texas Intermediate crude dropped $1.36, or 1.33%, to $101.12.
Both benchmarks gave up early gains after the Financial Times reported that foreign ministers from several Middle Eastern countries were working on a temporary agreement with Iran to manage shipping through the Strait of Hormuz.
Despite Friday’s declines, Brent and WTI had risen more than 6% on Thursday and were still more than 10% higher for the week.
“Some headlines of possible new talks in the Middle East are weighing moderately on oil prices today,” said Giovanni Staunovo, an energy analyst at UBS. He said near-term risks remained tilted towards higher oil prices but warned that significant volatility was likely to continue.
Iran said it had attacked 10 ships near the Strait of Hormuz on Wednesday after the US destroyed five Iranian oil tankers. The Islamic Revolutionary Guard Corps warned that it would escalate its response to further attacks.
Ship traffic through the strategic waterway also declined. Preliminary tracking data showed seven vessel transits on Thursday, down from 11 the previous day and well below the 10-day average of 15.
Before the war began in late February, the Strait of Hormuz handled about one-fifth of global daily oil and liquefied natural gas supplies. Restrictions in the waterway have raised concerns about the availability and cost of energy in international markets.
Shipping risks have also spread beyond the strait. Iran-aligned Houthis seized control of Yemen’s port of Mocha, posing another potential threat to Red Sea traffic. Attacks on Saudi energy facilities have added to concerns that disruption could spread across a wider part of the region.
The International Energy Agency said global oil supply and demand were expected to decline more than previously forecast this year, with the lack of progress towards ending the Iran war delaying the return of normal Middle East supply flows into 2027.
US diesel prices have been particularly affected. The national average exceeded $6 a gallon for the first time on Thursday, according to GasBuddy, as disruptions linked to the Iran war coincided with Ukrainian attacks on Russian refineries.
“Refined products, particularly diesel, are feeling a one-two punch right now,” said Tim Waterer, chief market analyst at KCM Trade.
US President Donald Trump has shown no indication of easing attacks on Iran. He warned that the US could strike Iran’s Pickaxe Mountain near the damaged Natanz uranium enrichment facility, while saying he expected the war to end immediately after the November midterm elections.
In China, the state planner said retail price caps for petrol and diesel would rise from September 12 by 260 yuan and 250 yuan per metric ton respectively.
