LONDON, Aug. 29 -- Brent crude fell toward $88 a barrel on Thursday, capping a week in which the Iran risk premium that had kept oil elevated through much of August quietly drained out of the market. The week's roughly 5% slide came not from a demand shock or production surge, but from a growing conviction that the Strait of Hormuz, the chokepoint that carries a fifth of the world's oil, was no longer the powder keg it was in March.

The front-month Brent contract settled at $88.22 a barrel, down 34 cents from Wednesday's close. West Texas Intermediate, the American benchmark, fell further, dropping 71 cents to $82.82 a barrel. Both benchmarks have now given back most of the conflict premium that accumulated when Iranian strikes on Gulf s...