Oil prices edged lower in Asian trading on Friday and were headed for weekly declines as investors weighed the prospects of a U.S.-Iran agreement and reports that both sides were close to extending a fragile ceasefire.

As of 02:32 ET (06:32 GMT), Brent Oil Futures expiring in July eased 1.3% to $92.45 per barrel, while West Texas Intermediate (WTI) crude futures fell 1.5% to $87.55 per barrel.

Both benchmarks were on track to post losses of nearly 10% for the week, marking their sharpest weekly declines in months.

Market sentiment improved after reports emerged that Washington and Tehran had reached a draft agreement to extend their ceasefire for 60 days while negotiations continue over Iran’s nuclear program and regional security issues.

The proposed agreement still requires approval from U.S. President Donald Trump.

The prospect of a peace deal has reduced concerns over immediate supply shortages and supported expectations that shipping activity through the Strait of Hormuz could gradually normalize.

Traffic through the strategic waterway, however, remains well below pre-conflict levels, keeping a geopolitical risk premium embedded in oil markets.

“The market has increasingly priced in a resolution this week. Therefore, any confirmation of a deal that reopens the strait means that significant further downside is likely limited, particularly during the early stages of a ceasefire,” ING analysts said in a note.

“The market is more vulnerable now than it was pre-war, given the significant inventory drawdowns we have seen over the last 3 months,” they added.

Oil prices have remained highly volatile in recent sessions as markets reacted to conflicting headlines surrounding ceasefire negotiations. Crude briefly rebounded on Thursday after reports of fresh military exchanges between U.S. and Iranian forces, though gains faded later as diplomatic optimism resurfaced.

Investors were also assessing the broader macroeconomic backdrop after U.S. inflation data showed price pressures remained elevated. Higher-than-expected personal consumption expenditures inflation reinforced expectations that the Federal Reserve may keep interest rates higher for longer.

At the same time, revised U.S. economic growth data pointed to softer momentum in the first quarter, adding to worries about the outlook for global energy demand.