International oil prices have fallen back to levels seen before the recent conflict between the United States and Iran, as growing supplies and renewed exports have shifted attention away from fears of shortages. Analysts now say the oil market may be heading toward a period of oversupply after weeks of concern that fighting in the Middle East would severely disrupt global energy markets.
Only a few months ago, Brent crude climbed above $126 per barrel after conflict between the US and Iran led to the closure of the Strait of Hormuz, one of the world’s busiest oil shipping routes. Industry officials had warned at the time that global oil inventories were becoming very tight. That situation has changed quickly. Brent crude is now trading near $70 per barrel, while the physical oil market has weakened to levels not seen since demand collapsed during the COVID-19 pandemic.
A memorandum of understanding signed by the US and Iran on June 17 included a 60-day suspension of hostilities and the reopening of the Strait of Hormuz. Shipping has gradually resumed, although the broader political situation remains uncertain and oil production in parts of the Middle East is still suspended. Even with those risks, more crude has been returning to the market than many analysts expected.
Several major financial institutions lowered their oil price forecasts this week. Goldman Sachs said the fading impact of the conflict and recovering shipments through the Strait of Hormuz could push the market back into oversupply next year. The bank expects strategic reserve purchases to absorb part of the extra supply, but not all of it. It estimated that the average daily surplus next year could be just over 3 million barrels.
Goldman Sachs reduced its year-end Brent forecast to $80 per barrel. Under a scenario where supply fully returns to normal, it said prices could fall to around $60 per barrel by the end of 2026.
Morgan Stanley also cut its forecast for the second time in two weeks. The bank said recovering Middle Eastern production, along with strong US crude exports, is likely to increase supplies over the coming months. It expects Brent crude to reach around $70 per barrel by the end of 2027.
Citigroup shared a similar view. Analysts there said both Washington and Tehran appear to have strong reasons to maintain the agreement signed in June, even though short-term price swings remain possible. The bank expects additional oil supplies to put downward pressure on prices during the second half of the year and projected Brent could finish the year between $60 and $65 per barrel.
Diplomatic talks have also affected market sentiment. Qatar said negotiators from the US and Iran made positive progress during discussions, though several issues remain unresolved. President Donald Trump also said discussions over Iran’s denuclearization were moving in a positive direction. Oil prices fell for a fourth straight day after news of those talks, with Brent trading below $71 per barrel and US benchmark WTI slipping below $68.
Traffic through the Strait of Hormuz has started to recover, though it remains below normal levels. Data from shipping trackers showed vessel crossings increasing during the week, suggesting more oil is leaving the Persian Gulf. Analysts are watching inbound and outbound traffic closely because it may indicate how quickly exports can fully recover.
Some experts believe lower prices could encourage countries to rebuild oil inventories, increasing demand and reducing the surplus over time. Others say the next challenge will come after supplies normalize, when OPEC+ may have to decide whether production cuts are needed to support prices. The future of the market still depends on whether the ceasefire holds and how quickly producers respond as more oil returns.
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