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US-Iran deal calms Hormuz risk as oil prices slide to 4-month lows
Brent sinks to multi-month lows as a US-Iran MoU eases Hormuz risks; Wood Mackenzie sees $78 oil in 2027 and $70 by late 2027 amid a swift supply rebound
- PUBLISHED: Wed 24 Jun 2026, 1:55 PM
Oil markets are rapidly reverting to pre-crisis dynamics as easing US-Iran tensions defuse fears of a prolonged disruption in the Strait of Hormuz, dragging prices lower and reshaping medium-term forecasts.
Brent crude fell $1.37, or 1.8 per cent, to $75.71 a barrel by 0805 GMT on Tuesday, touching its weakest level since February 27, Reuters data showed. US West Texas Intermediate slipped $1.08, or 1.5 per cent, to $72.13, also hitting multi-month lows as supply flows show signs of recovery.
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Wood Mackenzie now expects Brent to average $78 per barrel in 2027, with prices potentially easing further to $70 by the fourth quarter, reflecting a shift in sentiment following a US-Iran Memorandum of Understanding that points to a phased reopening of the Strait.
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The agreement comes after mounting supply pressures. On June 15, US President Donald Trump warned that domestic reserves could run out “in about four weeks,” while inventories at the Cushing hub had dropped close to operational limits, accelerating diplomatic efforts.
Prices had been elevated earlier in the year, with Brent averaging $92 per barrel in the first half of 2026. However, investor positioning for higher prices has since collapsed, falling by about 80 per cent from a five-year high in the four weeks to June 16.
Shipping data underlines the tentative recovery. Vessel traffic through the Strait peaked at 35 ships on June 18 — up from the low teens during the disruption, though still below pre-war levels. The consultancy expects transit flows to normalise by August.
The earlier supply shock had removed more than 11 million barrels per day from global markets. Wood Mackenzie estimates that 70 per cent of shut-in volumes could return within three months of reopening, rising to 90 per cent within six months, with the remaining output taking longer to recover.
Julius Baer analysts say the market turnaround has been unusually swift, with exports already rebounding to more than 80 per cent of pre-crisis levels. That shift suggests the market may have already moved from deficit into surplus.
“Emptied storage could sooner than expected begin to refill. This process takes time and should lend some support to prices, before the storage surplus likely returns next year. The past weeks’ sell-off largely came from a swift shift in the market mood from bullish to bearish, which anticipates these normalisation trends in parts. We stick to our cautious view, maintain our short position, and trim our 3-month forecast to $70,” said Norbert Rücker, Head Economics and Next Generation Research, Julius Baer.
Rücker added that the restoration of supply chains across wells, refineries, and export routes is progressing faster than expected.
“Thanks to contained damage and mostly reduced but not curtailed production the complex ramp-up of wells, refineries, and exports seems to happen in orderly and swift manner, supported by the instant arrival of empty tankers. Exports out of the Middle East likely are back above 80 per cent. Considering the pre-crisis surplus and the demand setbacks over the past months, the market likely already flipped from deficit into surplus,” Rücker said.
Despite the rapid recovery in crude flows, downstream markets remain tight. Refining margins have improved but not fully normalised, with jet fuel crack spreads still nearly double pre-war levels.
“A prolonged closure would have pushed Brent well above $150 a barrel,” said Alan Gelder, Senior Vice President, Macro Oils, Wood Mackenzie. “The MoU changed that trajectory. But the full value chain, from wellhead through to Gulf Cooperation Council ports, will take the better part of a year to fully recover. Jet crack spreads running at almost double pre-war levels are the clearest signal that this market has not yet normalised. Getting the barrels back is a different challenge from reaching a deal.”
However, some point out that despite the recent decline in prices, a return to the pre-disruption oil market is unlikely. Global oil inventories remain below pre-pandemic levels and will eventually need to be replenished, which could support future demand. In addition, the disruption highlighted the vulnerability of global energy supply chains, meaning a geopolitical risk premium is likely to remain in oil prices. "While higher energy costs have encouraged some long-term demand reduction through greater efficiency and investment in alternative energy, current market weakness appears to be driven more by the need to clear a backlog of oil than by a lasting imbalance in supply and demand. As a result, oil prices may remain under pressure in the short term, but a sustained move back to the old $60–70 Brent crude range appears unlikely," said Ole Hansen, Head of Commodity Strategy, Saxo Bank .
Associate Editor Somshankar Bandyopadhyay brings more than three decades of experience to the KT newsroom. Currently, he manages the news production of the business section, ensuring that the top economic and business news of the day reaches its readers.