Oil edged higher as traders speculated on whether fresh clashes between the US and Iran would derail a fragile ceasefire, dimming hopes a peace deal may be struck soon.

Brent crude, the global benchmark, rose 1.2% to settle around $101 a barrel, but still notched a weekly drop of about 6%. Renewed fighting in the Persian Gulf rattled markets even as US officials said they expect Iran to respond to its latest proposal to end the war imminently and reopen the vital shipping route, the Strait of Hormuz.

The oil market’s focus remains on the strait, which has been effectively closed since the war began at the end of February. That’s triggered an unprecedented supply shock, with flows of crude choked off and wells across the region shut in.

Iran criticized the US on Friday and said it had violated their ceasefire agreement. The country is also preparing a plan for the “legal regime” of the strait, according to a statement cited by the semi-official Tasnim news agency.

“Control of the Strait of Hormuz has emerged as Iran’s strongest bargaining chip,” Societe Generale SA analysts including Ben Hoff wrote in a note. “Recent vessel seizures and harassment underscored that while diplomacy is the base case, there is a material risk of renewed fighting.”

US forces carried out airstrikes on two empty Iranian oil tankers that were trying to break a US naval blockade of the country’s ports, and the US targeted missile and drone launch sites in Iran that it said were responsible for attacking three American warships.

US President Donald Trump said the three American warships had successfully exited the waterway, and were undamaged, according to a social-media post. The ceasefire remains in effect, Trump said after those exchanges of fire.

“Oil is trading between two risks: diplomacy on one side and another escalation on the other,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Markets are still giving the peace proposal a chance, but not enough of a chance to take the war premium out.”

The latest clashes heighten tensions across the region, as the US tries to exit the war that’s imposed an increasing burden on consumers with retail gasoline and diesel prices spiking. Inflation concerns have pushed US consumer sentiment to a record low for a second straight month.

Crude briefly dipped on Friday afternoon after Trump announced that there would be a three day ceasefire between Russia and Ukraine. The conflict, which sent prices soaring when it first began in 2022, has recently been overshadowed by the Iran war.

Prices fluctuated in a roughly $10 range this week as expectations for a resolution to the conflict shifted by the minute. On Monday, Brent futures surged to about $115 after Iranian attacks on ships and energy infrastructure in the United Arab Emirates, as the US sought to guide vessels through Hormuz.

Futures have since eased as the Trump administration waits for Tehran to respond to its one-page document that would move to end fighting and reopen the strait, even though the two sides would still need to negotiate a deal over Iran’s nuclear program.

Iran’s leaders have yet to indicate whether they’ll accept the proposal’s terms.

Extreme volatility has forced dealers to scale back their risk exposure, pushing open interest in the global benchmark to nine-month lows.

Adding to the confusion, Iran on Friday said it seized a tanker in the Gulf of Oman that appeared to be a sanctioned vessel carrying the Islamic Republic’s own oil. The United Arab Emirates, meanwhile, said on Friday air-defense systems were intercepting missiles and drones.

The head of the International Energy Agency warned the world was losing 14 million barrels of oil a day because of the war, and ramping up production after the conflict would be gradual. Fatih Birol also reiterated during a visit to Canada on Thursday that the Paris-based IEA was prepared to take further action after members agreed in March to release 400 million barrels.

Bridgewater Associates founder Ray Dalio said the outcome of the US-Iran conflict can be defined in “almost black-and-white terms of who will control the Strait of Hormuz,” according to comments to a New York Times podcast.

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