Oil prices edged lower during Friday's Asian trade as traders weighed improving supply prospects after crude tankers resumed movements through the Strait of Hormuz following a peace agreement between the United States and Iran.
By 2:45pm AEST, Brent crude futures were down 43 cents, or 0.5%, at US$79.42 a barrel, while U.S. West Texas Intermediate crude for August delivery fell 37 cents, or 0.5%, to US$75.48 a barrel.
The declines followed a sharp easing in geopolitical risk premiums after both benchmarks touched their lowest levels since early March during Thursday's session.
Market sentiment improved after several oil tankers successfully navigated the Strait of Hormuz following the reopening of the strategic waterway.
Among the vessels were three Saudi-flagged supertankers carrying a combined 6 million barrels of crude oil, which transited the strait just hours after the presidents of Iran and the United States signed an interim agreement aimed at ending their conflict.
Analysts at ANZ said uncertainty surrounding the next phase of negotiations was likely to keep some caution in energy markets despite the reopening of the vital shipping route.
"Now begins the difficult period of negotiations regarding Iran’s nuclear program, which will see some level of caution remain.
"U.S. Defense Secretary Hegseth said that if Iran doesn’t comply, the U.S. is more than able to reimpose an ironclad blockade."
The Strait of Hormuz is one of the world's most important energy corridors, handling a substantial share of global oil and natural gas exports.
The reopening of the passage has eased concerns about prolonged supply disruptions that had driven oil prices higher during the conflict.
Additional signs of improving supply emerged from major regional producers.
Kuwait Petroleum Corporation announced on Thursday that it had lifted, with immediate effect, all force majeure notices issued during the war, signalling a return to normal export operations.
Meanwhile, Iraq's Oil Minister Basim Mohammed said the country's oilfields were ready to resume production and that output would gradually return to normal levels, restoring pre-conflict production rates.
The prospect of increased flows from major Middle Eastern producers has reinforced expectations that global supply conditions could improve in coming weeks, helping to offset some concerns about tight energy markets.
However, geopolitical risks have not disappeared entirely.
Israel has continued military operations against Hezbollah in Lebanon, raising questions about the durability of the broader regional ceasefire and whether the U.S.-Iran agreement can hold over the longer term.
Investors were also monitoring diplomatic developments after reports that U.S. Vice President JD Vance had withdrawn from a planned trip to Switzerland, where talks with Iranian negotiators were expected to continue on Friday.
Attention is now shifting towards the next stage of negotiations between Washington and Tehran, particularly discussions surrounding Iran's nuclear programme and the potential easing of sanctions.