Oil prices fell sharply on June 18, reaching their lowest levels since the United States-Iran conflict began.
According to Reuters, the markets are reacting to a preliminary agreement between the U.S. and Iran that could restore oil flows through the Strait of Hormuz and increase global crude supplies.
“Brent crude futures were down US$1.53, or 1.9%, at US$78.02 a barrel at 1326 GMT [Greenwich Mean Time], while U.S. West Texas Intermediate [WTI] fell 2.22, or 2.9%, to US$74.57 a barrel. Brent sank to its lowest since March 2, which was the first day of trading after the initial U.S.-Israeli strikes on Iran, while WTI was at its lowest since March 4,” Reuters said.
Under the Memorandum of Understanding (MOU) between Washington and Tehran, there is a 60-day negotiation period that includes provisions to restore shipping through the Strait of Hormuz, one of the world’s most important oil and gas transit routes.
Reuters said analysts expect oil exports through the strait to recover gradually.
“Investment bank Goldman Sachs expects Gulf exports to normalize to pre-war levels by end-July, with crude production recovering by October. The bank estimates that a normalization in exports to pre-war levels might be achieved with a 13 million barrel-per-day increase in Hormuz flows from current levels to around 70% of pre-war levels,” Reuters stated.
Before the reopening of the Strait, Wood Mackenzie reported that Brent crude prices could approach US$200 per barrel by the end of 2026 if leaders in the United States and Iran failed to settle by September.
The last time oil prices were this high was the 2022 Ukraine war | OilNOW
The report warned that a prolonged closure of the Strait could trigger one of the largest global energy supply shocks in decades, with more than 11 million barrels per day of Gulf crude and condensate production affected and about 20% of global liquefied natural gas (LNG) supply cut off from international markets.
