Oil prices rose today but were on track for their first weekly decline since February 9 as US President Donald Trump extended a pause in attacks on Iran's energy plants, though investors remain cagey about prospects for ceasefire in the month-old war.
Brent crude futures rose by $1.87, or 1.73%, to $109.88 a barrel by 10 am GMT.
US West Texas Intermediate futures were up $1.57, or 1.66%, at $96.05.
The Brent benchmark has jumped 52% since February 27, the day before the U.S. and Israel launched strikes against Iran, but was down 2.1% this week. WTI, up 43% since the war began, was down 2.3% over the week.
"Despite talks of de-escalation, oil is trading on war longevity, not just headlines. Any direct damage to oil infrastructure or prolonged conflict could force markets to rapidly reprice higher," said Priyanka Sachdeva, analyst at Phillip Nova.
While Mr Trump extended to April 6 his deadline for Iran to reopen the Strait of Hormuz or face the destruction of its energy infrastructure, the US has also sent thousands of troops to the Middle East, with Mr Trump weighing whether to use ground forces to seize Iran's strategic oil hub of Kharg Island.
An Iranian official told Reuters that a 15-point US proposal, conveyed to Tehran by Pakistan, was "one-sided and unfair".
The conflict has taken about 11 million barrels per day out of global oil supply, with the International Energy Agency describing the crisis as worse than the two 1970s oil shocks combined.
"Every day flows through the Strait remain restricted, more than 10 million barrels of oil are missing ... tightening the oil market further," said UBS analyst Giovanni Staunovo.
Analysts at Macquarie Group said that oil prices will fall quickly if the war begins to wind down soon but still remain above pre-conflict levels. However, prices could rise to $200 if the war drags on until the end of June, they added.
"With each passing day, market pressure is building. Asian countries are tapping buffer stocks and weighing demand adjustments," said Mukesh Sahdev, founder and CEO of Australia-based consultancy XAnalysts.
