Oil prices react sharply to US–Iran standoff: Fuel market outlook explained

Thus, energy prices are heading toward their first weekly decline in nearly two months, as supply concerns have eased and investors have focused on the outcome of talks between the United States and Iran.

Brent crude futures rose by 78 cents, or 1.2%, to $68.33 per barrel, while US West Texas Intermediate crude climbed by 80 cents, or 1.3%, to $64.09 per barrel.

Nevertheless, Brent was set to end the week down 3.3%, falling 4.8% from late January highs, while WTI was heading for a weekly decline of 1.8% and a drop of 3.4% from a nearly six-month high reached last month.

Any escalation of tensions between Iran and the United States could disrupt oil flows, as about one-fifth of global consumption passes through the Strait of Hormuz between Oman and Iran.

Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq export most of their crude oil through the strait, as does Iran. If talks between the United States and Iran reduce the likelihood of conflict in the region, oil prices could fall further.

In the worst-case scenario of open confrontation between the two countries, oil and fuel prices could rise sharply within weeks.

"We believe that geopolitical concerns will give way to weak fundamentals," analysts at Capital Economics said in a note.

Earlier, India's Reliance Industries exported aviation fuel to Europe for the first time since the European Union ban on imports of products made from Russian oil took effect.

Indian oil refineries have increasingly refused premium grades of Russian crude due to concerns over secondary sanctions and payment difficulties.

In January, Russia's revenues from oil and gas exports nearly halved year-on-year and fell to their lowest level since July 2020.