Oil halts two-week losing run on fading hopes for end to Middle East conflict

Oil prices slipped on Friday after operations at a key port in Oman returned to normal following a reported drone strike. However, benchmark crude contracts were on track to snap a two-week losing streak as hopes for a pace deal in the Middle East took a major hit. 

Brent crude futures expiring in August, the global oil benchmark, fell by 2.3% to settle at $92.89 a barrel, while U.S. West Texas Intermediate crude futures expiring in July declined 3% to settle at $90.25 a barrel.

Omani terminal resumes operations, Hezbollah rebuffs Israel-Lebanon ceasefire 

Developments in the Gulf remained at the top of oil market participants’ minds. Oil prices received a reprieve on Friday after Oman announced that operations at the Mina al Fahal port were back to normal following reports that oil loadings had been halted after an explosion.

Reuters reported that the explosion occurred between two single-buoy mooring berths because of an alleged drone attack, citing people familiar with the matter. It was not clear when the strike took place, Reuters said, adding that LSEG data showed several supertankers anchored off the port.

But broader hopes for a peace deal between the U.S. and Iran were dented after Hezbollah dismissed a ceasefire between Israel and Lebanon. Iran, which is aligned with Hezbollah militants, has made a cessation in fighting in Lebanon a key demand in peace negotiations.

The U.S. and Israel launched a joint assault on Iran in late February that has since spread to include other areas in the region, including Lebanon.

In a statement, Hezbollah’s leader described the U.S.-brokered agreement between Israel and Lebanon earlier this week as "absurd, humiliating, and insulting." According to the Associated Press, the announcement came as Israeli attacks killed at least four people. Lebanese troops moved into areas of southern Lebanon on Thursday which have been the scene of intense fighting for months, the AP said, citing state media.

Oil prices halt two-week winning run 

The ceasefire had been seen as a positive step towards a broader peace deal between the U.S. and Iran, but with Hezbollah’s rejection, diplomatic efforts have again taken a hit. The Iran-backed milita’s move was yet another example of rising tensions in the Middle East this week, boosting crude. 

Aside from Israel’s operations in Lebanon, there were fresh strikes in the Gulf involving Iranian missile attacks on Kuwait and Bahrain and U.S. strikes on Iran’s Qeshm island near the Strait of Hormuz.  

Meanwhile, the critical Strait of Hormuz continues to be all but shut, leading to the biggest oil supply disruption in history and surging oil prices, which in turn have led to an inflationary shock around the world. 

Brent futures added 0.9% for the week, while WTI gained 3.2%.