Crude oil markets posted their first weekly loss in three weeks on Friday despite new US sanctions on Iran as Oman-led diplomatic talks sparked hopes for temporary shipping corridors.
West Texas Intermediate settled at $83.44 per barrel, down from $86.64/bbl the previous week, while Brent closed at $89.37/bbl, down from $93.70/bbl a week earlier.
Throughout the week, regional diplomacy in the Middle East advanced as Oman mediated talks between Iran and international parties.
By midweek, Iran and Oman agreed on a phased framework to establish a temporary joint navigational corridor and a joint mine-clearance project to restore safe commercial navigation.
This followed visits to Tehran by Omani and Pakistani officials and a constructive meeting between Omani Foreign Minister Sayyid Badr Albusaidi and his Iranian counterpart.
"I am hopeful we will soon announce a temporary corridor for the Strait of Hormuz and practical arrangements to restore safe navigation," Omani Foreign Minister Sayyid Badr Albusaidi said in a social media post on X on Tuesday.
These diplomatic moves coincided with conflicting claims regarding the security of the vital waterway.
President Trump asserted that the US Navy had cleared or detonated all water mines in the strait, estimating that 10 million barrels transited the waterway on Tuesday, and warned that any attempt to lay new mines would trigger an immediate military response.
However, US allies reportedly warned that the channel likely remains mined, reflecting persistent caution among operators.
MarineTraffic and Kpler data indicated that while commercial traffic showed tentative signs of resilience such as a minor uptick to 121 crossings in the Hormuz, overall flows remained well below pre-war levels.
Separately, Iran's Persian Gulf Strait Authority issued a statement blacklisting 45 tankers for violating local rules.
On the geopolitical and economic fronts, the US administration unleashed a massive escalation in economic pressure against Tehran.
On Monday, US Treasury Secretary Scott Bessent unveiled a global sanctions package dubbed "Operation Economic Outcast," targeting over 60 entities, individuals, and vessels across digital assets, technology, gold, aviation, and shipping sectors to sever Iran's global financial lifelines.
The White House clarified that the US is not negotiating with Tehran and that port blockades will remain in force.
Analysts pointed out that the sanctions' ultimate market impact hinges heavily on whether Washington can persuade major buyers like China, which strongly opposes unilateral measures, to curb purchases.
The new set of sanctions against Iran is unlikely to significantly deepen the hit to the country's oil revenues unless Washington succeeds in persuading China to curb purchases, Rystad Energy strategists said in a note on Monday.
"Iranian crude exports have already fallen sharply because of the blockade, and Beijing is essentially the only significant buyer left. Unless China materially reduces purchases further, the additional impact on Iranian oil revenues could be relatively limited," Jorge Leon, senior vice president and head of geopolitical at Rystad Energy, said.
Meanwhile, Washington moved to tighten financial pressure on Tehran once again on Friday.
The US Treasury's Financial Crimes Enforcement Network proposed a rule to revoke Banque Misr UAE's correspondent banking access to US financial institutions as part of Operation Economic Outcast.
"Treasury promised to sever every economic lifeline Tehran has left and finally end the threat of the Iranian regime," Treasury Secretary Scott Bessent said.
Treasury's Office of Foreign Assets Control also sanctioned the manager of Bank Melli's Dubai branch, along with a Hong Kong-based front company that helped launder funds for a sanctioned Iranian exchange house.
Meanwhile, regional maritime threats remained prominent, underscored by a UK Maritime Trade Operations report detailing a confirmed security incident on Wednesday involving an oil tanker forced to anchor off the Omani coast, alongside an earlier attack near Yanbu, Saudi Arabia.
Crude transits through the Strait of Hormuz have recovered to roughly two-thirds of pre-war levels, Saxo Bank analysts said, citing Goldman Sachs estimates.
On the supply side, data from the Energy Information Administration, released Wednesday, showed US commercial crude oil inventories increased by 100,000 barrels to 428.9 million barrels for the week ended Aug. 21.
The US oil rig count decreased by five, from 452 the previous week to 447 in the week ending Aug. 28, according to data from Baker Hughes (BKR) released Friday. The US had 412 oil rigs in operation a year earlier.
The consolidated North American rig count, a key early indicator of future production levels, dropped by five to 799 from 804 the previous week.
Meanwhile, money managers in the WTI crude futures and options markets maintained their net long positions in the week ended Aug. 25, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released Friday.
The data showed that money managers reported 203,162 long positions, up 7,531 from Aug. 18, while short positions were up 6,993 to 98,589.
Money managers' net long position increased by 538 contracts to 104,573 contracts from 104,035 the previous week. This indicates little change in bullish positioning even as crude prices declined.