WTI Settles at $89.31 and Brent at $96.78 as Pakistan-China Diplomacy Trims Iran War Premium

West Texas Intermediate crude settled at $89.31 per barrel on Friday's CME close, down $2.88 or 3.12% on the day. September Brent crude settled at $96.78 per barrel on the ICE exchange, a fall of $3.01 or 3.88%. Reports that Pakistan, backed by China, is pushing to restart peace negotiations between the United States and Iran triggered profit-taking across oil futures markets ahead of the weekend.

A Week of Extreme Volatility

Despite Friday's pullback, both benchmarks posted strong weekly gains. WTI crude advanced 9.21% for the week while Brent rose 9.85%, as Middle East hostilities escalated through Thursday. The U.S. conducted airstrikes against Iranian military targets on multiple occasions during the week. Houthi forces attacked two Saudi crude tankers with drones and missiles on Thursday, amplifying supply-disruption fears before the Pakistani diplomatic initiative broke late Friday.

WTI climbed more than 25% since the start of July, breaching $92 per barrel intraday before the Pakistan-China initiative provided a catalyst for Friday's selloff. Brent had traded above $100 per barrel earlier this week, the first such level since early 2024, before retreating to the $96.78 settlement. Friday's move still left crude up roughly 10% for the week despite the late-session losses.

Positioning, Not Supply

UBS analysts observed that "the war premium came out of positioning, not out of the supply picture," pointing to technical repositioning ahead of the weekend rather than a change in physical supply. The Strait of Hormuz has remained open throughout the latest Iran escalation cycle, despite repeated Iranian closure threats. Pakistan's mediation effort marks the first formal third-party diplomatic initiative since June 18 ceasefire efforts faltered.

EIA Forecast vs. Current Market

The EIA's July 2026 Short-Term Energy Outlook, published July 7, projected Brent at an average of $74 per barrel for the third quarter of 2026. Friday's settlement of $96.78 places Brent $22.78 per barrel above that quarterly baseline, a gap that reflects how thoroughly the geopolitical premium repriced after June 18 ceasefire efforts faltered. The EIA also forecast the full-year 2026 Brent average at $81.91 per barrel, implying a substantial second-half decline if diplomatic progress materializes.

Analyst Forecasts Diverge

Goldman Sachs maintained its Q4 2026 Brent forecast at $80 per barrel on July 23, citing supply recovery if Iran tensions ease by year-end and flagging upside risks from prolonged Hormuz disruption and depleted inventories. Morgan Stanley cut its Brent forecast to $75 per barrel, citing faster-than-expected recovery in Strait of Hormuz shipping. UBS places year-end Brent at $85 per barrel under a de-escalation scenario.

These three analyst forecasts span a $10 range from $75 to $85 per barrel for year-end Brent. Friday's $96.78 settlement sits $11.78 to $21.78 per barrel above all three year-end targets, indicating significant room for retracement if diplomacy succeeds. The spread between current pricing and consensus year-end targets reflects genuine uncertainty over whether Pakistan's mediation can produce a durable ceasefire or whether U.S.-Iran tensions will remain elevated through the year.

Alberta Heavy Crude Producers Watch the Differential

Western Canadian Select closed at $79.84 per barrel on July 24, a 7.2% gain, as Oil Authority reported. With WTI at $90.47 on that same day, the WCS-WTI differential stood at $10.63 per barrel. That compares to a $12.40 per barrel discount reported by BOE Report in early June 2026, a narrowing of $1.77 per barrel that directly improves netback realizations for Alberta oil sands operators including Suncor Energy.

What Comes Next

Asian markets will provide the first read on weekend diplomatic developments when they open Sunday. If Pakistan's mediation produces a credible framework before U.S. futures reopen Monday, further selling toward the Goldman Sachs Q4 2026 Brent baseline of $80 per barrel is plausible. A breakdown in talks, or new Houthi strikes on Gulf shipping, would likely reverse Friday's losses and push WTI back toward Thursday's $92 per barrel intraday high. The EIA's longer-term outlook projects Brent falling to $64.76 per barrel in 2027, conditional on a durable resolution to the U.S.-Iran conflict.