The US-Iran memorandum of understanding (MoU) marked the end of crude's war-driven rally, sending prices tumbling from their peak above $110/Bbl as traffic through the Strait of Hormuz began to normalize and Gulf producers moved to restore disrupted supply.
Crude prices surged following the outbreak of the US-Iran conflict as Iran effectively halted traffic through the Strait of Hormuz, disrupting exports from one of the world's largest oil-producing regions. Even before the MoU was signed, however, prices began to soften as markets increasingly anticipated a diplomatic resolution. The formal agreement quickly validated that view. Confidence returned to the shipping industry as tanker movements accelerated, with Bloomberg estimating that crude exports from the Persian Gulf recovered to roughly 75% of pre-conflict levels.
Goldman Sachs' Dan Struyven argued that many bullish forecasts underestimated the resilience of the global oil market, pointing to ample inventories, alternative export routes (Saudi Arabia's East-West Pipeline and the UAE's Abu Dhabi Crude Oil Pipeline), and strong growth in non-OPEC production. The MoU also introduced the prospect of additional Iranian supply by granting broad sanctions waivers for oil exports, reinforcing expectations of a looser global market. Reflecting that view, Goldman lowered its fourth-quarter 2026 Brent forecast to $80/Bbl from $90/Bbl.
JPMorgan reached a similar conclusion, cutting its Brent forecasts after determining that weaker demand, rather than inventory depletion, played a larger role in balancing the market. The bank noted that softer Chinese crude demand, coupled with rising production from countries outside the Gulf, offset much of the supply disruption markets had feared.
The geopolitical risk premium that dominated trading throughout the conflict has largely been replaced by questions surrounding global supply and demand. With Gulf exports recovering and non-OPEC production continuing to grow, the next major catalyst may be China. If lower prices entice Chinese buyers back into the market, renewed demand could establish a floor beneath crude prices. However, the market is not entirely in the clear. Recent vessel strikes underscore that some geopolitical risks persist, while Lebanon remains the most likely flashpoint that could derail broader negotiations. Until then, crude markets will likely remain driven by fundamentals, but the Middle East remains a key source of upside risk.