Oil prices fell sharply, with Brent crude futures dropping about 4% to $79.88 a barrel and U.S. West Texas Intermediate (WTI) crude falling 4.7% to $76.93, marking their lowest closes since early March. This decline was primarily driven by news of an interim deal between the U.S. and Iran, aimed at ending their conflict and reopening the Strait of Hormuz, a crucial waterway through which approximately 20% of global oil supplies flowed before the war. The deal, announced by U.S. President Donald Trump, includes extending a ceasefire by 60 days and is expected to be formally signed in Geneva on Friday, June 19.
The prospect of renewed oil flows through the Strait of Hormuz has prompted leading investment banks, including Goldman Sachs, Morgan Stanley, and Citi, to revise down their oil price forecasts. Goldman Sachs, for instance, lowered its fourth-quarter Brent forecast to $80 a barrel from $90, anticipating that Persian Gulf exports could return to pre-war levels by the end of July, a month earlier than previously expected. Morgan Stanley also cut its price outlooks, and RBC Capital Markets noted that a full return to pre-war shipping levels might take months.
Despite the positive outlook on supply, doubts and cautions remain. Analysts from Commerzbank warned that even with the reopening of the Strait, it could take weeks for shipping traffic and energy exports to normalize due to safety concerns, including potential sea mines. Shipping executives and traders are awaiting more clarity and reassurances on safety before committing vessels to the route. The oil market is also awaiting weekly storage reports from the American Petroleum Institute later on Tuesday and the U.S. Energy Information Administration on Wednesday, with analysts estimating a draw of 4.5 million barrels from crude storage for the week ended June 12.
