Oil prices are headed for a significant weekly decline after President Donald Trump indicated that the ceasefire with Iran would hold despite renewed clashes between US and Iranian forces, bolstering expectations of a possible agreement.

Brent crude failed to hold onto its gains, settling above $100 a barrel, and is on track for a weekly drop of more than 7%.

US Central Command said that US forces struck military targets in Iran after Tehran fired on three US Navy destroyers sailing in the Strait of Hormuz. However, the command added that it was "not seeking escalation."

President Trump indicated that the three warships successfully exited the waterway and were undamaged by the attacks, according to a social media post. In subsequent remarks to reporters in Washington, he noted that the ceasefire with Iran remained in effect despite the exchange of fire.

Hormuz remains at the forefront of attention. The oil market's focus remains on the strait, which has been virtually closed since the start of the conflict in late February. This has led to an unprecedented supply shock, choking off crude flows and shutting down wells across the region.

The waterway faces a double blockade, with Tehran obstructing traffic while the US prevents ships from docking at or departing from Iranian ports.

Sharu Chanana, chief investment strategist at Saxo Markets in Singapore, said: "Oil is trading between two dangers: diplomacy on one hand and further escalation on the other." She added: "Markets are still giving the peace proposal a chance, but it's not enough to remove the war premium from prices."