Oil markets have experienced significant volatility this week as investors assessed the likelihood of a breakthrough between Washington and Tehran that could restore normal shipping operations through crucial Strait of Hormuz.

Concerns briefly resurfaced after new US military strikes on Iran on Wednesday night and a retaliatory attack by Iran’s Revolutionary Guard on a US airbase in the region. However, sentiment improved after reports emerged that negotiators were moving closer to an agreement to extend a fragile ceasefire for 60 days, pending approval from US President Donald Trump, according to sources cited by AFP.

The development helped reverse early losses on Wall Street, with major US indexes ending Thursday’s session in positive territory.

Oil prices retreat

During Friday trading in Asia, Brent crude fell more than 1% to US$92.54 per barrel, while US benchmark West Texas Intermediate (WTI) declined 1.5% to US$87.56 per barrel.

Stock markets advance

South Korea led gains across Asia, with Seoul's market rising 3.6%, while Tokyo's Nikkei index closed at a record high. Strong gains were also recorded in Sydney, Taipei and Hong Kong. Shanghai was the exception, ending the day 0.7% lower.

European markets also opened higher, with London, Paris and Frankfurt posting gains.

Economic concerns persist

Wall Street's gains came despite economic data showing that the Federal Reserve’s preferred inflation measure rose in April to its highest level since 2023, while first-quarter US economic growth was revised downward.

The combination of persistent inflation and slowing economic growth has reduced expectations for near-term Federal Reserve interest rate cuts, despite repeated calls from President Trump for lower borrowing costs.

Matthew Martin of Oxford Economics said recession risks were easing as oil prices moderated and fears of a worst-case scenario diminished.

He added that while reduced geopolitical risks had supported markets, the primary driver of rising equity prices remained a strong corporate earnings season, particularly spending linked to artificial intelligence.

AI boom continues

Investor enthusiasm surrounding artificial intelligence has fuelled a strong global market rally. This week, semiconductor manufacturers Micron and SK hynix both surpassed US$1 trillion in market value.

Europe Focuses on Trade with China

European leaders are expected to discuss trade imbalances with China during a key meeting on Friday.

European Union commissioners will debate potential measures to protect European companies from what Brussels describes as unfair competition from Chinese firms.

Meanwhile, official figures released on Friday showed that France's economy contracted by 0.1% in the first quarter compared with the previous quarter, a downward revision from an earlier estimate of zero growth.