Crude oil markets bounced back on Friday despite mounting doubts about the durability of the recently announced US-Iran truce, with traders caught between optimism over a potential regional settlement and alarm at deepening military tensions in the Levant. By early morning trading, Brent crude futures climbed 51 cents to settle at $80.36 per barrel, representing a 0.64% gain, while US West Texas Intermediate crude surged $1.28, or 1.7%, to $77.88 per barrel. The rebound offered some respite after both benchmarks logged weekly losses approaching 8%, though the strength of the recovery remained constrained by lingering uncertainty about whether the fragile peace framework could withstand the weight of renewed geopolitical friction.

The abrupt cancellation of scheduled talks in Switzerland between American and Iranian negotiators deflated expectations for an imminent diplomatic breakthrough. Vice President JD Vance's decision to abandon planned travel to the talks signalled cooling enthusiasm from Washington at a moment when initial agreements had only just been sealed, injecting a fresh layer of doubt into markets already jaded by years of failed Middle East peace initiatives. The sudden reversal prompted oil market observers to reassess their assumptions about sustained regional stability, with many traders questioning whether the optimism that had briefly buoyed sentiment in recent days could be sustained through the coming weeks.

Israel's escalation of military operations against Hezbollah in Lebanon added another dimension of risk to the calculus. The intensifying conflict threatened to unravel the delicate understanding reached between Washington and Tehran, particularly given the interconnected nature of proxy conflicts and state actors throughout the region. Analysts warned that localised tensions could metastasize into broader regional instability if key parties lost confidence in the peace framework, potentially disrupting the fragile mechanisms needed to sustain the truce beyond its initial weeks.

The immediate market reaction reflected this cautious recalibration. Vandana Hari, founder of oil market analysis firm Vanda Insights, cautioned that while prices may have found a temporary floor, the emergence of visible cracks in the memorandum of understanding suggested renewed volatility lay ahead. The analyst noted that markets lacked confidence in the political will required to normalise shipping through the Strait of Hormuz, the critical chokepoint through which roughly one-fifth of global petroleum and liquefied natural gas flows in normal times. This emphasis on tangible evidence of reduced geopolitical risk underscored trader scepticism about taking large long positions based purely on diplomatic statements.

Thursday's market action had illustrated the speed at which sentiment could shift. Within hours of US and Iranian presidents signing an interim accord, several tankers including three Saudi-flagged vessels carrying 6 million barrels transited the strategic waterway, suggesting initial market participants believed the deal could hold. Yet this brief flash of confidence proved ephemeral. Thursday had also seen both benchmarks reach their lowest levels since early March, a precipitous decline that reflected the magnitude of supply potentially released by the settlement. Analysts projected that more than 85 million barrels of crude stranded in Middle Eastern facilities could flow into global markets if the agreement endured, with additional upward pressure on supply arriving through the lifting of US sanctions on Iranian oil exports.

The prospect of this flood of crude weighed heavily on price expectations, despite the tactical Friday rebound. Tim Waterer, chief market analyst at KCM, articulated the fundamental tension constraining prices: traders remained deeply sceptical that Strait of Hormuz transit would normalise swiftly enough to justify lower valuations without clearer evidence of sustained operational improvements. The analyst's observation captured the broader market psychology—optimism about the peace deal's economic implications coexisted uneasily with pessimism about its political durability and the timing of any actual benefits reaching global energy supply chains.

Middle Eastern oil producers had begun repositioning themselves for a return to normalcy, recognising both the opportunity and the risks embedded in the emerging arrangement. Kuwait Petroleum Corporation lifted all force majeure declarations issued during the conflict with immediate effect Thursday, signalling management's confidence that disruptions had ended. Iraq's petroleum ministry similarly moved to restore production to pre-conflict rates, with Oil Minister Basim Mohammed asserting that oilfields stood ready for a gradual return to historical output volumes. These producer actions represented bets that the diplomatic settlement would hold long enough to justify capital and operational commitments.

Yet the broader geopolitical context remained treacherous. The continuation of Israeli military pressure on Lebanese Hezbollah forces raised fundamental questions about whether the underlying conditions that had produced the US-Iran accord remained sufficiently stable to sustain the agreement through its implementation phase. Historical precedent offered little comfort; Middle East peace arrangements had repeatedly foundered on the rocks of localised conflicts and sectarian tensions that nominally sat outside formal diplomatic agreements. The challenge for oil markets now involved distinguishing between temporary tactical volatility and signals of deeper structural breakdown in the emerging regional equilibrium.

For Asian energy importers including Malaysia and other Southeast Asian economies heavily dependent on stable oil supplies, the current impasse carries material consequences. Elevated volatility complicates corporate planning and government energy policy formulation at a moment when the region remains sensitive to crude price movements. Should the peace framework collapse, a return to supply disruptions and regional military escalation could rapidly drive prices higher, straining government budgets and corporate profitability across energy-intensive sectors. Conversely, if the agreement holds and the projected 85 million barrels of additional crude flow to global markets unimpeded, the region's refineries and petrochemical producers could benefit from more abundant feedstock supplies, though depressed margins would likely offset pricing advantages.

The weeks ahead will prove decisive in determining whether Friday's rebound represents a genuine floor or merely a temporary technical bounce before deeper losses resume. Market participants are now waiting for hard evidence that normalisation is occurring—actual tanker traffic data, operational schedules from major producers, and policy confirmations from Washington and Tehran. Until such concrete manifestations of the peace framework's viability emerge, oil markets will likely remain prone to sharp swings as traders reassess their assumptions about geopolitical risk and future supply trajectories.