By: Economy Middle east

Oil prices declined on Friday and were headed for their sharpest weekly drop in six months after U.S. President Donald Trump said negotiations to end the war with Iran were progressing well and that he would suspend attacks on the country’s energy facilities for 10 days.

By 5:35 GMT, Brent crude futures were down 61 cents, or 0.56 percent, at $107.4 a barrel, while U.S. West Texas Intermediate crude fell 77 cents, or 0.81 percent, to $93.71 a barrel, giving back some of the previous session’s gains.

Oil prices decline 4.6 percent for the week

Despite Thursday’s rally, when Brent jumped 5.7 percent and WTI rose 4.6 percent on fears of further escalation, oil prices were down 4.6 percent for the week.

“The global crude benchmark is on pace for the biggest monthly gain since 1990 as the conflict engulfs the energy-rich Middle East and sends shockwaves through the global economy. It is expected that oil may still spike to $150 a barrel even if a ceasefire is announced as soon as tomorrow, as it would take time for supply chains to return to full capacity,” said Vijay Valecha, Chief Investment Officer, Century Financial.

Although Trump said attacks on Iran’s energy infrastructure would be paused, the United States has deployed thousands of troops to the Middle East, while he considers whether to send ground forces to capture Iran’s key oil terminal on Kharg Island.

Trump said on Thursday that talks with Iran were progressing very well. However, an Iranian official rejected the U.S. proposal to end the war, calling it one-sided and unfair.

Traders price rate hike on energy-led inflation concerns

Tensions in the region have removed 11 million barrels per day from global oil supply, with the International Energy Agency saying the disruption is more severe than the oil crises of the 1970s and the gas shock caused by the Russia-Ukraine war combined.

Brent crude remained above $105 a barrel on Friday, intensifying inflation concerns as the conflict in the Middle East has nearly brought shipments through the Strait of Hormuz to a standstill. The waterway is a key route for around one-fifth of global crude and LNG trade.

Rising oil prices risk adding further pressure to inflation since they factor into the costs of shipping.

Traders are no longer pricing in any U.S. rate cuts for 2026 and now see a 35 percent probability of a rate increase by the end of the year, according to CME Group’s FedWatch Tool. That marks a sharp shift from expectations for two rate cuts before the conflict began.