Oil steadies for weekly gain as U.S.-Iran fighting disrupts shipping

Oil prices fell sharply on Thursday as investor concerns over persistent inflation and its implications for interest rates outweighed the geopolitical risk premium driven by renewed U.S.-Iran hostilities. The pullback came just a day after crude surged more than 5% when President Donald Trump declared an end to the ceasefire with Iran.

A Volatile Week in Energy Markets

Brent crude futures settled about 2% lower on Thursday, retreating toward $77 per barrel after jumping to near $80 on Wednesday — their highest level in several weeks, according to Reuters. West Texas Intermediate futures also declined, falling roughly 1.6% to around $72 per barrel.cnbc+1

The selloff reflected a market betting that the latest round of U.S. strikes on Iran would not escalate into full-scale war. "The oil market is not pricing in a full closure of Hormuz," said Andy Lipow, president of Lipow Oil Associates. Citibank analysts told clients Thursday that the U.S. and Iran were likely to return to negotiations within weeks.cnbc

By Friday, oil prices steadied and remained on track for a weekly gain as renewed fighting disrupted shipping through the Strait of Hormuz. Brent hovered around $76 per barrel, having started the week near $72, according to The New York Times.reuters+1

Inflation Fears Weigh on Markets

The midweek oil spike served as what Reuters described as an inflation "wake-up call" for global investors. Bond yields climbed on worries that elevated crude prices could feed through to consumer prices, complicating the Federal Reserve's path. The 10-year Treasury yield rose to 4.56% on Wednesday before easing slightly Thursday. Expectations for Fed rate cuts in 2026 have been slashed from more than two to between one and two.reuters+2

Gold also came under pressure, with spot prices heading for a weekly decline of over 1%, according to Reuters. Comex gold settled 1.79% lower at $4,070.90 earlier in the week as rising crude costs strengthened expectations that interest rates would remain elevated.reuters+1

Conflict Context

The week's volatility was triggered by Trump's announcement Wednesday that an eight-week interim agreement with Iran had ended, followed by U.S. strikes on Iranian targets. Iran retaliated by targeting U.S. military installations in Bahrain and Kuwait. Tanker traffic through the Strait of Hormuz slowed as the security situation deteriorated, though NPR reported that oil prices remain "well below their peak at the height of the war this spring".nytimes+3