By Giulia Petroni
Major Wall Street banks cut their oil-price forecasts after the U.S. and Iran reached an interim deal to end hostilities and reopen the vital Strait of Hormuz waterway, with Persian Gulf flows now expected to recover to prewar levels sooner than anticipated.
Goldman Sachs expects Brent crude, the international oil benchmark, to average $85 a barrel this year, down from prior estimates of $90 a barrel. Morgan Stanley sees Dated Brent--a benchmark for physical markets--at $90 a barrel in the fourth quarter from $100 previously, and at $80 next year.
President Trump said the U.S. would lift a naval blockade of Iranian ports and that the Strait of Hormuz would reopen this week, restoring passage through one of the world's most critical energy chokepoints. A specific list of agreed-upon details hasn't been released yet, but the deal is set to be officially signed on Friday.
Morgan Stanley said the increase in production could begin in mid-July rather than late July, with 50% of lost output restored by September, 80% by December, and a full recovery in early 2027. Even so, analysts cautioned that a full normalization of flows would take time.
A full resumption of tanker traffic through the Strait will first require time to clear sea mines. Even after that, confidence among shipowners and insurers will need to be rebuilt, and tankers--many of which have been redeployed elsewhere--will have to return to the region.
Goldman said it expects Persian Gulf exports to return to prewar levels as early as late July--about a month sooner than previously anticipated. Risks to its outlook, however, remain two-sided.
Oil supply could recover faster than expected, with Gulf exports returning to their prewar levels even if Hormuz traffic recovers to only about 70%. Saudi Arabia and the United Arab Emirates could also boost production more aggressively if inventories tighten over the summer.
Some shipments have already been rerouted through alternative channels and oil flows from Gulf countries have increased from less than 30% of normal levels in early March to nearly 50% by mid-June, according to the bank's estimates.
Still, the potential resumption of regional hostilities, shipping disruptions, mine-clearance delays or a renewed closure of Hormuz could slow the recovery. "Iran might effectively close the Strait again even after reopening, for instance if detailed nuclear talks don't succeed," analysts at Goldman said.
The bank expects prices to remain relatively resilient in 2027 despite forecasting a 3.2 million barrel-a-day surplus, saying that low inventories and strategic stockpiling will cushion the impact. It expects more than 1 million barrels a day of demand to come from stockbuilding, while a lingering geopolitical risk premium should help put a floor under prices.
Brent is forecast at $75 a barrel and WTI at $70 a barrel.
The bank also said the oil market has shown greater-than-expected flexibility, absorbing what it described as the largest production shock on record--about 14 million barrels a day--with a smaller-than-expected deficit in the second quarter.
In afternoon European trading on Tuesday, Brent crude fell below $82 a barrel, while WTI was around $79 a barrel. Both benchmarks have fallen more than 10% from a week ago.
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
06-16-26 0616ET
