Oil prices fell in early trade on Friday, extending losses as optimism grew that the Middle East conflict may be nearing an end following a 10-day ceasefire between Israel and Lebanon and fresh signals of possible US-Iran talks over the weekend.Brent crude futures declined $1.34, or 1.35%, to $98.05 a barrel, while US West Texas Intermediate (WTI) crude fell $1.65, or 1.74%, to $93.40, trimming gains from the previous session.

Ceasefire, diplomacy drive sentiment

Markets were buoyed by signs of diplomatic progress, with US President Donald Trump indicating that Washington and Tehran could resume talks soon. “We’re going to see what happens. But I think we’re very close to making a deal with Iran,” Trump said on Thursday.Addressing a key sticking point, Trump said Tehran had offered not to possess nuclear weapons for more than 20 years, raising hopes of a breakthrough in negotiations aimed at ending the war.According to Reuters, US and Iranian negotiators are now focusing on a temporary memorandum rather than a comprehensive peace deal, in a bid to prevent a return to conflict.

Supply disruption concerns remain

Despite easing prices, concerns over supply disruptions persist. The conflict has shut the Strait of Hormuz for seven weeks, choking off roughly one-fifth of the world’s oil supply. As per Reuters, analysts at ING estimate that about 13 million barrels per day of oil flows have been disrupted.Oil prices had surged nearly 50% in March during the peak of the crisis and, although they have fallen below the $100 mark recently, they have largely remained in the $90 range this week.Crude prices are expected to fluctuate between $80 and $100 until a durable peace deal is reached and normal navigation through the Strait of Hormuz resumes.