TradingKey – On Tuesday, Brent crude futures for August delivery settled down over 5% at $78.96 per barrel, falling below $80 for the first time in three months. Brent has fallen for four consecutive trading days, marking its longest losing streak of the year and erasing nearly all gains since the outbreak of the war.
The catalyst for the decline in oil prices was the improvement in the US-Iran conflict, with Trump stating that the US and Iran are expected to sign a memorandum of understanding for an interim agreement in Switzerland this Friday (June 19), after which the Strait of Hormuz will reopen.
Both Goldman Sachs and Morgan Stanley revised their oil price outlooks following the news of the agreement. According to their latest research reports, Goldman Sachs lowered its Brent price forecasts: cutting its Q4 2026 forecast to $80 per barrel, $10 lower than its previous projection, and lowering its full-year 2027 average price forecast from $80 to $75. Morgan Stanley, meanwhile, cut its Q3 Brent forecast from $100 to $90, and its Q4 forecast from $95 to $80.
Goldman Sachs brought forward its forecast for Persian Gulf exports to return to pre-war levels, moving it from late August to late July. Morgan Stanley analyst Martijn Rats stated in a report that significant details still need to be negotiated and key risks have not fully disappeared, predicting that Persian Gulf production will recover by 50% by September and 80% by December, representing a slight acceleration compared to previous forecasts.
Regarding the recovery of the Strait of Hormuz, some institutions hold a more cautious outlook. RBC Capital Markets analyst Helima Croft and others noted in a report that it will take months to return to pre-war levels, and that peak traffic through the Strait of Hormuz may actually be a thing of the past.
Jyske Bank analyst Haider Anjum noted in a client report that relevant companies prefer to wait and see if the agreement can actually be implemented. Asian and European shipping firms generally believe that transit is unlikely to return to normal quickly in the short term. Mitsui O.S.K. Lines explicitly stated that it will only restart routes once safety is fully confirmed.
David Jorbenaze, head of global oil markets at ICIS, pointed out that returning to pre-conflict shipping levels realistically might not happen until 2027, and that is contingent on the stable implementation of the US-Iran agreement and a rapid recovery in production.
Is there a risk of a rebound in oil prices going forward?
According to a Reuters report, data released by the American Petroleum Institute (API) on Tuesday showed that US crude inventories fell for the ninth consecutive week, decreasing by 8.33 million barrels for the week ending June 12. Other data shows that since late March, the US has drawn a cumulative total of approximately 66 million barrels of crude oil from its Strategic Petroleum Reserve (SPR); commercial inventories are also under pressure, with Cushing commercial inventories falling to 21 million barrels.
John Auers, managing director of refined fuels analytics at RBN Energy, pointed out that storage tanks typically need to maintain 10% to 15% of their capacity to sustain normal operations. When Cushing inventories fall to around 20 million barrels, operational difficulties will begin to emerge. Auers stated that once tank bottoms are hit, operations will grind to a halt.
However, it will still take time for Middle East crude production to recover. Michael Haigh, head of commodities research at Société Générale, stated that after shipping volumes through the strait recover, it takes 52 days for oil to reach Asian buyers and be refined. Assuming the strait successfully reopens by the end of June, the earliest supply relief would not arrive until late August, with a large-scale return to normal expected in September. Consequently, inventories will continue to be drawn down in July and August, exacerbating inventory pressures.
Currently, the US and Iran remain divided on the transit terms for the strait after 60 days. The US believes the strait will continue to remain open free of charge, while Iranian media reported that the strait will offer a 60-day toll-free policy for transiting vessels, after which it will be jointly managed by Iran and Oman. If a future agreement cannot resolve this issue, uncertainties will persist for crude oil transit.
Goldman Sachs analysts pointed out that under a scenario where supply disruptions in the Strait of Hormuz persist into 2027, Brent crude prices could still break above $130 by the end of 2026 and average $105 next year, with the risk premium used to hedge against supply disruptions continuing to support crude prices.