Oil prices fell below the $90-a-barrel mark on Friday after President Trump called off strikes on Iran and said a peace deal could be reached within days, the latest twist in a volatile week for crude markets.

In midmorning European trade, Brent dropped 4% to $86.69 a barrel, while West Texas Intermediate futures were down 4.1% to $84.15 a barrel. Both benchmarks are headed for weekly losses of around 9%.

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“The price action in oil markets is no surprise,” said Warren Patterson and Ewa Manthey, commodities strategists at ING. “However, in the absence of a deal, this is unlikely to last.”

The shift came after Trump threatened to launch another wave of military strikes against Iran on Thursday, saying the U.S. military would seize Kharg Island—Tehran’s main oil export hub—and assume total control of its oil and gas markets. Negotiations to reopen the Strait of Hormuz and end the conflict have so far hit an impasse, with disagreements over Iran’s nuclear program and demands for financial relief standing in the way of a broader deal.

Markets have taken comfort from signs of de-escalation, but analysts caution that sustainability depends on concrete progress toward resuming shipments through the Strait of Hormuz.

If flows don’t resume by late July, the market could reach a tipping point where tightening inventories and seasonal demand drive prices sharply higher—potentially toward $120-130 per barrel, according to some market watchers.

“The relatively benign price action in recent weeks masks the scale of the supply disruptions from the Persian Gulf,” the ING analysts said.

Despite prolonged disruptions and falling inventories, oil prices have remained well below March highs, when Brent approached $120 a barrel. The release of emergency oil reserves, softer global demand, lower Chinese crude imports, stronger U.S. exports and pipeline rerouting from Saudi Arabia and the U.A.E. have all helped mitigate the supply shortfall.

Write to Giulia Petroni at giulia.petroni@wsj.com

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