Oil markets were little changed on Friday as the Iran US war oil prices story took a fresh turn: Iranian President Masoud Pezeshkian declared that Tehran wants to bring the conflict with the United States to a close as quickly as possible, framing the country’s position as one of strength.
Brent crude futures added 61 cents to close at $94.39 per barrel, while US West Texas Intermediate futures rose 23 cents to $87.06. Despite the calm on Friday, oil prices finished the week more than 5% higher, a move driven largely by remarks from US Treasury Secretary Scott Bessent earlier in the week.
What the Iran-US memorandum of understanding actually said
At the centre of the latest diplomatic manoeuvring is the memorandum of understanding (MOU) that the US and Iran signed on 17 June. Al Jazeera has reported that the document was a 14-point agreement which established a 60-day period for negotiations aimed at reaching a wider peace deal. The MOU also included a commitment from both sides to the ‘immediate and permanent termination of military operations on all fronts, including in Lebanon.’
On the economic side, the US agreed under the MOU to begin work on a reconstruction and development package for Iran worth at least $300 billion. For its part, the agreement allowed Tehran to play a central role in determining how the Strait of Hormuz would be administered, through negotiations with Oman and the other Gulf states.
Pezeshkian described the MOU as a victory for the Islamic Republic. Speaking through state news agency PressTV, he said ‘it is better to end the war today’ when Iran is ‘in a position of power and dignity.’ But crude oil prices had eased significantly over the first two weeks of August as US officials suggested a deal with Tehran was imminent, only to rise again after an agreement failed to materialise and rhetoric from both sides escalated once more.
Iran US war oil prices: sanctions threats rattle traders
Bessent told CNBC on Thursday that Washington intends to impose what he called the ‘toughest sanctions in history’ against Iran, echoing threats made by President Donald Trump and saying the US aims to collapse the regime in Tehran. Yet Bessent also said traders had misinterpreted those threats by bidding up oil prices. The economic pressure campaign, he argued, means the US is unlikely to return to large-scale combat operations against Iran as it steps up financial pressure instead.
Helima Croft, head of global commodity strategy at RBC Capital Markets, pushed back on that framing. Iran is already one of the most sanctioned countries in the world, she told CNBC’s ‘Squawk on the Street.’ Whether further sanctions will alter Tehran’s behaviour remains an open question, she said, adding that Iran appears to believe it can outlast the US. Croft also pointed to the uncertainty over whether Washington would go after China and Russia, both partners of Iran.
The Strait of Hormuz and a tightening diesel market
The Strait of Hormuz remains the physical chokepoint at the heart of the crisis. The US military told CNBC on Thursday that it has helped tankers transport more than 660 million barrels of oil through the strait since early May. Based on previous statements from the military, that implies at least 160 million barrels, or more than 7 million barrels per day, exited the strait over the three weeks before that statement.
Even so, the disruption to flows has been severe. ‘The Strait of Hormuz is not closed but we still estimate that we’re losing from this war about 8 million barrels a day,’ Croft said. Before the war, about 20 million barrels per day of oil and products passed through Hormuz.
While crude prices remain well below their wartime peak, Croft warned that another market deserves close attention. Ukraine’s attacks on Russian refineries, combined with Middle East outages, have left the global diesel market extremely tight. Diesel underpins the broader economy as the primary fuel for agriculture and freight. ‘Diesel prices are at historic highs and we do not have spare refining capacity for diesel,’ Croft said. ‘That is the market when it comes to energy to pay very, very close attention to.’ With the 60-day MOU negotiation window in play, the next weeks of talks will determine whether that pressure eases or intensifies.
