Global oil prices slid decisively below the $80-a-barrel threshold this week for the first time since the opening days of the Middle East war, as markets raced to price in the imminent signing of a US-Iran framework agreement. Brent crude touched $78.24 in early Asian trading on Wednesday, extending a two-day rout that erased roughly 10% of value, while West Texas Intermediate hovered near $75. The selloff, viewed from trading floors in London and Singapore, reflects a conviction that the three-month conflict that shut the Strait of Hormuz—choking off more than 14 million barrels a day of Middle Eastern supply—is drawing to a close. With the pact expected to be signed in Switzerland on Friday, Iranian tankers have already begun signalling a tentative resumption of voyages, and the physical Murban benchmark in the Gulf has retreated to $71.81.

Yet the relief is tempered by the scale of the damage already inflicted on global energy balances. In its monthly report published on Wednesday, the International Energy Agency slashed its 2026 demand forecast by 700,000 barrels per day from May, now projecting a year-on-year contraction of 1.1 million bpd. The revision, three times steeper than the previous estimate, captures the cascading effects of fuel-price spikes and disrupted product supply chains that caused second-quarter deliveries to drop nearly 5%—the first quarterly retreat since the pandemic. On the supply side, the agency marginally improved its 2026 outlook to a decline of 3.9 million bpd, but noted that government-held emergency stocks have been drawn down to their lowest levels since 1990, a vulnerability that will take years to replenish.

Viewed from Washington, the interim truce is a calculated gamble: it offers Tehran immediate financial incentives, including the right to resume oil sales, in exchange for reopening the strait and a 60-day ceasefire. Analysts in Latin American capitals note that the deal has already triggered a sharp unwinding of the geopolitical risk premium, with Brazilian and Argentine market commentary highlighting the return of speculative flows to risk assets. In the Gulf, however, the mood is more guarded. Oman crude, which had spiked to $166.96 for May delivery, has collapsed to $72.99, a drop of nearly $94, underscoring the violent repricing but also the fragility of the supply chain that must now be painstakingly rebuilt.

Looking ahead, the IEA’s first full-year forecast for 2027 sketches a market swinging from scarcity to glut. Supply is projected to surge by 8 million bpd to 110 million bpd, driven by the return of Iranian barrels and a broader recovery, while demand grows by just 2 million bpd. The resulting surplus of more than 5 million bpd would be one of the largest on record, raising the spectre of a prolonged period of low prices that could destabilise higher-cost producers from the Americas to West Africa. For now, the immediate focus remains on the physical reopening of Hormuz, which officials in Tehran and Washington acknowledge will be gradual. As one European energy analyst put it, the market is betting on a “Trump put”—a belief that the White House will not tolerate a renewed supply shock—but the path back to normalcy is strewn with operational and political hazards that could yet snuff out the nascent optimism.