U.S. crude oil futures experienced a significant decline, nearly erasing all gains made during the recent conflict, as vessel traffic through the Strait of Hormuz continued to increase. Investor concerns over a potential supply glut intensified with a substantial rebound in exports from the Persian Gulf.

Brent crude fell by 4.3%, settling below $72 per barrel, while WTI dropped 3.7% on Friday, closing around $69. WTI is hovering near its lowest levels since late February, a period marked by the onset of the war involving the United States and Israel against Iran.

The global oil market is signaling a near-term supply surplus, as substantial Middle Eastern oil supplies, previously disrupted from reaching global markets during the war, are returning. The contango in Brent futures, a structure indicating oversupply, widened on Friday to its largest extent since 2023.

Following initial progress in protracted negotiations to end the U.S.-Iran conflict, vessels have begun transiting the Strait of Hormuz normally, leading to a significant influx of new crude supply into the global market.

Crucially, Saudi Arabia has resumed loading crude oil at the Ras Tanura terminal within the Persian Gulf, indicating continued production expansion in the region. Based on calculations, crude exports from the Persian Gulf are currently at approximately 75% of pre-war levels.

Amid these bearish supply-side factors, oil prices erased Thursday's gains, which had seen a more than 2% increase following an attack on the container ship Ever Lovely near the coast of Oman.

The downward trend in oil prices persisted even as U.S. President Donald Trump accused Iran of violating the ceasefire by launching drones at vessels in the Strait of Hormuz.

Concurrently, the International Maritime Organization stated it is considering reactivating a vessel evacuation plan for the Persian Gulf.

"Crude remains clearly under pressure as the bearish narrative continues to focus on improving shipping flows through the Strait of Hormuz," said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. "While transit numbers appeared lower following yesterday's ship attack, shipping traffic has not completely halted."

Although Thursday's attack threatened the fragile confidence of shipowners and crews, vessels continued to pass through the narrow waterway on Friday.

Other restrictions may still persist around the Strait of Hormuz. Informed sources indicated that Oman has informed European officials that vessels transiting the Strait of Hormuz may be required to pay certain fees.

In New York, WTI August futures fell 3.7%, settling at $69.23 per barrel.

Brent August futures settled 4.3% lower at $71.99 per barrel.

Futures have declined more than 10% this week, completely erasing the gains accrued during the war period.