Oil prices climb 3% as traders grow skeptical of U.S.-Iran deal

Oil prices resumed their rally Friday after declining for three straight sessions as investors weighed mixed messaging on Iran peace deal negotiations.

The U.S. and Iran have signaled progress in talks to end the war, but the warring sides remain at loggerheads over Tehran's enriched uranium stockpile and tolls on the strategically vital Strait of Hormuz.

International benchmark Brent crude futures traded 3.4% higher at $106.06 per barrel in early London deals, while U.S. West Texas Intermediate futures advanced 2.9% to $99.08.

Brent and WTI both settled around 2% lower in the previous session, putting them firmly on track for their second negative week in three. Both contracts, however, are up more than 40% since U.S. and Israeli-led strikes against Iran started on Feb. 28.

Iran's Supreme Leader Ayatollah Mojtaba Khamenei issued a directive that near-weapons-grade uranium in the country should not be sent abroad, Reuters reported, citing Iranian sources.

This comes after U.S. President Donald Trump said that Washington was in the "final stages" of negotiations with Iran, according to a pool report.

"Markets are still searching for signs of progress in a potential deal between the US and Iran. While there are signs of optimism, uncertainty reigns," strategists at ING said in a research note published Friday.

"This is not the first time a deal seemed close, only for negotiations to break down. So, there's a large segment of the market that will be more sceptical about the positive signals we are seeing," they added.

Worries over oil supplies continue to linger with the International Energy Agency warning that as travel demand grows during the summer season, oil markets could enter a "red zone" soon as global stocks deplete.

The most important solution to the energy shock caused by the Iran war would be the Strait of Hormuz's full and unconditional reopening, IEA Executive Director Fatih Birol said, adding that developing Asian and African countries will feel the "biggest pain of this crisis."

Typically, roughly 20% of the world's oil and liquefied natural gas passes through the Strait of Hormuz, but shipping traffic has virtually halted since U.S. and Israeli-led strikes against Iran started on Feb. 28.

"Energy executives warned that full normalization of Middle East oil supply may not occur until 2027 due to the scale of disruptions caused by the conflict," according to a recent note by MUFG.