Oil prices slipped 2% reaching their lowest levels in three months as optimism over reopening of the key chokepoint- Strait of Hormuz. Reports of the signing of a peace agreement between the US and Iran have driven market sentiment. Additionally, weaker physical demand also weighed on sentiment.
Several market observers and key brokerage houses like Goldman Sachs see Crude prices sliding to pre-war levels by the end of 2026.
Oil slides to a fresh 3-month low
Brent crude futures were down 2.4% trading near the $81 per barrel mark,while the US contract for oil- West Texas Intermediate (WTI) was down 2.6% quoted around the $78 per barrel level. US President Donald Trump has said that the waterway passage, which transits nearly 20% of the global energy flows would be “completely open” on Friday, June 19.
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Pakistan, which helped mediate the talks, said a formal signing ceremony is planned in Geneva on Friday. While the announcement helped ease market fears as oil prices slumped 5% on Monday, full details of the Memorandum of Understanding (MoU) signed between Washington and Tehran have not been released.
Markets will eye the G7 discussions in France as news agency Reuters reported that French President Emmanuel Macron said that the priority was to ensure that the conflict is finalized.
Following these reports, the dollar index which gauges the strength of greenback against the basket of six major currencies was also trending down on day. Oil is predominantly traded in dollars, an increase in oil supply reduces the safe-haven demand for greenback.
Oil may return to pre-war levels
Analysts remain divided on whether the reopening of the Hormuz Strait would bring back oil prices to their pre-war levels. In a social media post on X, Ole Hansen, head of commodity strategy at Saxo Bank, said that oil prices depend on a number of factors, including the pace of replenishing commercial vehicles, extent of demand destruction caused by the prolonged West Asia conflict, and how quickly shut-in production can be brought back.
“The speed at which supply chains normalise and export flows recover will also play a key role in determining how much of the geopolitical risk premium remains embedded in the market,” the commodity strategist said in his post.
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Wealth management firm Goldman Sachs has lowered its Brent forecast for Oct-Dec, 2026 to $80 per barrel from the previous $90 per barrel, Reuters said in a report. It added that the bank has cut its 2027 average estimates to $75 from $80, based on the assumption that supplies through the waterway passage resume.
