Analysts think the positive reaction to the peace pact has been overdone: File Image/Pixabay

As questions mounted regarding the feasibility of the peace deal between the U.S. and Iran, oil prices on Friday rose minimally, with at least one analyst fearing that the initial reaction to the unlikely east-west pact may have been overdone.

David Oxley, chief commodities and climate economist at Capital Economics, said “Traders are kind of pricing in perfection; it’s the relief that the Strait [of Hormuz] is open – this is wonderful news compared with the nightmare scenario of it being shut - but actually, I think [the market] might have gone a little bit too far….It’s not necessarily a sign that everything is going to be completely smooth ahead.”

Adam Turnquist, chief technical strategist at LPL Financial, agreed, saying, “I do see pretty substantial risk that this doesn’t play out as optimistic as maybe some are pricing into the market.”

U.S. president Donald Trump’s highly touted 60-day Memorandum of Understanding between Washington and Tehran has managed to displease both hawks and doves, the former complaining that it will encourage the Islamic republic to instigate further damage to trade and security, and the latter citing Israel as amongst a host of potential disruptors that could cause the pact to collapse.

Former Pentagon official Brent Sadler warned, “The Iranians are going to now try and test the administration….and also to try to test the bounds of what they can get away with from U.S. pressure on the Israelis in Lebanon, especially when a response from the Israelis against an attack by Hezbollah is balanced and warranted.”

Indeed, one reason for Friday’s climb in oil prices was Iran calling off further talks between the U.S. in Switzerland.

Meanwhile, although traffic increased in the Strait of Hormuz, Al Jazeera reported that “traffic in the waterway remains a fraction of what it was before the war, when the channel saw 120-130 transits a day…More than 500 vessels are estimated to be waiting to exit the Gulf through the strait, which in peacetime carries about one-fifth of the global oil supply.”

The news agency added, “Ship operators have expressed doubt about the safety of their vessels and crew after nearly four months of threats and attacks.”

Still, optimism about future prospects remained intact in some quarters: Sheikh Nawaf Saud Al-Sabah, deputy chairman and CEO of Kuwait Petroleum Corporation, said Kuwait could raise its oil production to 2 million barrels per day (bpd) within a week, up from an average of 573,000 bpd in May.

Earlier this month, a KPC official said Kuwait will likely need up to 12 weeks after the strait re-opened to restore oil production.