Global oil markets suffered a second consecutive session of heavy selling on Wednesday, driving benchmark Brent crude below $80 a barrel for the first time since early March. The catalyst was the imminent signing of a provisional peace agreement between the United States and Iran, expected on Friday in Switzerland, which would reopen the Strait of Hormuz and lift the naval blockade that has paralysed the world’s most critical energy chokepoint for nearly four months. In London, Brent futures touched $77.75 before a modest technical rebound, while West Texas Intermediate slipped under $75 in New York. The Oman crude marker, a key Gulf benchmark, plummeted to $72.99, nearly $94 below its wartime peak. Equity markets rallied on the prospect of normalising energy flows, with the S&P 500 climbing more than 3 percent from its recent lows, and bond traders scaled back bets on further interest rate rises.

Viewed from Paris, the International Energy Agency’s latest monthly report underscored the extraordinary scale of the disruption and the uneven path ahead. The agency revised its 2026 global demand forecast sharply lower, now projecting a contraction of 1.1 million barrels per day—almost triple the decline it anticipated a month ago—as high fuel prices and supply-chain fractures destroyed consumption. On the supply side, the IEA estimates a loss of 3.9 million barrels per day this year, with second-quarter deliveries plunging by 5 million barrels per day year-on-year. Yet the report’s first look at 2027 paints a radically different picture: a supply surge of 8 million barrels per day, driven by the return of Iranian and broader Middle Eastern output, against demand growth of just 2 million barrels per day, creating a colossal surplus of more than 5 million barrels per day. Analysts in Moscow noted that Russian Urals crude would likely average $68 a barrel in the third quarter and $62 in the fourth, reflecting the bearish turn.

From Tehran, the first tangible signs of the détente emerged as Iranian tankers began sailing out after a two-month standoff, testing the fragile truce. Gulf trading desks reported that the Murban benchmark was flat, while physical crude markets across Asia started to price in a gradual resumption of flows. However, the IEA cautioned that government strategic stockpiles have been drawn down to their lowest levels since 1990, with global inventories shrinking at a record pace of 4.6 million barrels per day in May alone. The war is estimated to have blocked more than 14 million barrels per day of Middle East production at its height, and the agency warned that even a full reopening of Hormuz would not immediately erase the accumulated vulnerabilities.

Looking ahead, the market is tentatively pricing a new equilibrium. Analysts in London and Moscow see Brent stabilising in a $75–85 range through the third quarter, before sliding toward $70 by year-end as the surplus begins to materialise. The IEA’s message is one of cautious relief: the worst supply shock in decades may be receding, but the transition from scarcity to abundance will be gradual, and the depleted stockpiles leave the global economy with little buffer against any fresh geopolitical setback. As one veteran analyst put it, the immediate prognosis assumes no significant reversals—a bet the world is now compelled to make.