Crude oil prices extend losses despite ongoing US-Iran war tensions. What's near-term outlook?

US-Iran war: Oil prices declined on Friday and were headed for their first weekly drop after two consecutive weeks of gains, despite rising in the previous session after a report said US President Donald Trump was unwilling to return to earlier terms of a deal with Iran.

Brent crude futures slipped 25 cents, or 0.3%, to $89.45 a barrel, while West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.3%, to $83.31 a barrel.

Both benchmarks were set to post weekly losses, with Brent down 5.3% and WTI lower by 4.3%.

What's weighing on crude oil prices?

According to a Wall Street Journal report, the Trump administration has repeatedly conveyed to mediators that it is not interested in reviving the June memorandum of understanding, making efforts to bring the two sides back to the negotiating table more difficult.

Earlier on Thursday, Washington said it was not holding talks with Iran, despite attempts by other countries to restart diplomatic engagement between the two nations.

On Monday, the US announced what it described as the “toughest sanctions in history” against Iran. Tehran condemned the measures as an “inhumane and hostile act”, arguing that they had lost their effectiveness.

Meanwhile, geopolitical tensions rose after Moscow warned that it could target British military installations both inside and outside Ukraine in retaliation for Kyiv’s use of British-supplied long-range cruise missiles in attacks on Russian territory.

Trump, however, said Russian President Vladimir Putin would not attack a NATO member and dismissed media reports that CIA Director John Ratcliffe had warned Russian officials this week against carrying out such an attack. Britain is among NATO’s founding members.

Crude oil price outlook

According to Kaynat Chainwala, AVP Commodity Research, Kotak Securities, crude oil extended its losing streak is a diplomatic progress on the Strait of Hormuz outweighed a smaller-than-forecast US inventory build. Iran and Oman reached agreement on each country's share of the strait's waters and related revenues, building on Wednesday's talks toward a permanent maritime corridor, joint administration structure, and traffic-management mechanisms, with Iranian officials citing a 30-to-60-day window to finalize the new route.

“Prices have since pared losses, with Brent and WTI recovering to $88.2 and $82.2, underscoring how two-sided the market remains as traders balance diplomatic optimism against limited evidence of a meaningful improvement in physical flows. The path forward hinges on whether the 30-to-60-day corridor timeline holds and physical loadings actually rise, leaving prices vulnerable to sharp reversals on any setback,” Chainwala said.

Brokerage firm Choice Broking believes that the upcoming September–November refinery maintenance cycle should further tighten product availability and provide additional support to refining margins.

“We expect Brent price to average at USD84/b for FY27 and USD86/b for the current quarter (July-Sept 2026),” it said.

Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.