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- WTI trades around $82.90 on Friday, down 2.54% on the day at the time of writing.
- Crude Oil prices fall sharply after reports suggesting a US-Iran deal could be signed as early as this weekend in Geneva.
- The prospect of the Strait of Hormuz reopening is reducing the geopolitical risk premium embedded in Oil prices.
West Texas Intermediate (WTI) extends its decline for a second consecutive day on Friday, trading around $82.90 at the time of writing as investors unwind defensive positions following fresh signs of easing tensions in the Middle East.
According to a Bloomberg report, officials from the United States (US), Iran and the Group of Seven (G7) believe an agreement aimed at reopening the Strait of Hormuz could be signed as early as this weekend in Geneva. Several sources indicated that a memorandum of understanding is likely to be adopted initially before a final agreement is reached.
The development follows comments from US President Donald Trump, who stated that a peace agreement with Iran could be finalized within the coming days. According to reports from Iranian media, Tehran is also expected to support the proposed text after Washington accepted several conditions put forward by the Islamic Republic.
The prospect of reopening the strategic shipping route is weighing on Crude Oil prices by reducing concerns about prolonged disruptions to global energy supplies. The Strait of Hormuz is a critical transit point for Crude Oil and Liquefied Natural Gas (LNG) exports from the Middle East to international markets.
Despite the optimism, some market participants remain cautious. A full normalization of energy flows could take time, as shipping lanes may need to be secured, infrastructure restored and production facilities affected by recent regional tensions brought back online.
Maritime tracking data nevertheless show that several LNG tankers have already departed the area heading toward Asia, suggesting that operators are beginning to anticipate an improvement in navigation conditions.
This week’s sharp decline therefore reflects a rapid unwinding of the geopolitical risk premium that had supported Oil prices in recent weeks. Investors are now awaiting official confirmation of an agreement between the United States and Iran, which could further strengthen expectations for a normalization of global energy flows.
