Brent oil fell below $80 a barrel for the first time in more than three months as the US-Iran deal to reopen the Strait of Hormuz boosted expectations for a revival in supply, with leading Wall Street banks reducing their price forecasts and regional benchmarks collapsing.
Global benchmark Brent fell as much as 4.3%, on course for its longest run of declines this year. An interim agreement is due to be signed by both sides in Switzerland on Friday, and traders are anticipating that it will trigger a boost in output from the Middle East as well as the release of millions of barrels of oil stored on tankers inside the Persian Gulf.
Both Morgan Stanley and Goldman Sachs Group Inc. cut price outlooks for the coming quarters, with the latter now assuming Persian Gulf exports will reach pre-war levels by the end of July, a month earlier than previously forecast.
The clearest signs of the near-term impact were showing up in Middle Eastern benchmarks, where the market structure has collapsed in recent days thanks to expectations of higher supply and repeated offers to sell crude by Gulf producers. The Dubai benchmark was set to close in its biggest contango — a market structure that signals oversupply — since prices collapsed in the pandemic.
Oil’s drop to the lowest since early March has erased the bulk of the gains seen during the conflict, easing inflationary pressures just as policymakers at the Federal Reserve assess interest rates this week. Prices are now more than 35% lower than the war-time peak.
Still, many questions remain over how the interim pact will be implemented, including concerns over shipping safety, operating rules and whether the chokepoint — which carried about a fifth of oil supply before the war — will stay toll-free. President Trump reiterated on Tuesday that no tolls will be applied when it opens permanently.
