On Tuesday (June 23), Brent crude oil prices had fallen back to around $77-78 per barrel, a significant drop from the peak of the conflict. The easing of geopolitical tensions is rapidly eroding the dollar's competitive advantage, and oil prices may return to pre-conflict levels sooner than previously expected.



A strong US dollar and divergent central bank policies

The US dollar continued to extend its lead in the foreign exchange market, thanks to market confidence in the Federal Reserve's monetary tightening path. Under the leadership of new Fed Chairman Kevin Warsh, the Fed has demonstrated a more hawkish stance against inflation. Bank of America predicts that the Fed will raise interest rates three times in 2026 due to the strong US economy.

At the same time, falling oil prices have weakened the case for rival central banks, such as the European Central Bank (ECB), to tighten monetary policy. The increased energy costs during the conflict had previously provided these central banks with a basis for raising interest rates, but this support is rapidly disappearing. This policy divergence has further enhanced the attractiveness of the US dollar and put downward pressure on commodity prices.

Strait of Hormuz reopens: Supply floods in.

During the Middle East conflict, the prevailing market view was that Brent crude oil would not return to pre-war levels until the end of the year. However, with the reopening of the Strait of Hormuz, oil flows quickly resumed, and Brent crude oil prices have fallen below $78 per barrel.


According to data from the U.S. Central Command, daily throughput reached 17 million barrels over the weekend. Bloomberg, citing data from the past three days, estimated it at around 20 million barrels per day, indicating that flows have largely recovered. Although Iran and relevant parties may negotiate new transit conditions (such as fees), actual traffic volume has rebounded significantly.


Goldman Sachs believes that in the long term, shipping volumes through the Strait of Hormuz will fall back to about 70% of late February levels, as countries utilize alternative routes developed during the conflict. This, combined with declining demand from China, will exert sustained downward pressure on Brent crude oil prices.


Even a full recovery will take time: experts point out that while some tankers have begun to pass through, repairing damaged infrastructure, restoring production, and rebuilding supply chains could take weeks to months. However, the signs of a short-term supply surge and a potential "bear market" are already very clear.


Weak Demand: A Hidden Buffer for Global Markets

There is a growing consensus in the market that China's oil imports are unlikely to recover to previous levels. China's imports in February totaled 12.6 million barrels per day, but this represents a significant decrease of approximately 3.3 million barrels per day in the second quarter compared to the same period in 2025. Factors such as the shift to alternative energy sources, reduced demand for diesel and gasoline, and pressure on refinery margins have collectively led to weakening demand, directly driving down Brent crude prices.

Latest data shows that China's crude oil imports in May fell to a multi-year low (around 7.8 million barrels per day), which to some extent buffered the impact of the conflict on global prices. China is releasing crude oil from its strategic reserves, further easing global supply tensions.

Iran factor and pressure from oil-producing countries to increase production

In the short term, the temporary strengthening of North American crude oil prices is related to the US granting Iran a 60-day license to sell oil in US dollars. This move provides breathing room for the Iranian economy and brings hope for nuclear negotiations. However, the increase in Iranian production and the recovery of exports are clearly bearish factors for Brent crude.


Furthermore, Iraq's call for companies to quickly increase production to over 3 million barrels per day, along with the rapid pace of production recovery in Gulf countries, has become another catalyst for selling pressure in the oil market. OPEC+ members may accelerate the restoration of previously restricted production capacity, further exacerbating concerns about oversupply.

Outlook: When will the $70 mark be reached?

Based on the latest market developments, Brent crude oil faces significant downside risks in the short term. Institutions such as the EIA predict that as Straits traffic gradually normalizes, the average Brent price in 2027 may fall to around $79 per barrel, while some investment banks (such as JPMorgan Chase) hold a more optimistic (or pessimistic) view on the average price for the whole of 2026, predicting it may approach the $60-70 range.

When will it reach $70?

Optimistic scenario (rapid recovery): If supply fully returns and Chinese demand remains weak, the $70-75 support level could be tested within weeks to 2-3 months.

Baseline scenario: Most analysts believe that the $70 level is more likely to be seen in the second half of 2026 or early 2027, with seasonal demand and potential OPEC+ production cuts providing a buffer.

Upside risks: A breakdown in negotiations, renewed geopolitical conflicts, or rapid depletion of inventory could push prices up, but the current momentum strongly points to a downside.

Overall, the return of supply due to geopolitical easing, coupled with weak demand, is creating a more relaxed oil market environment. Investors need to closely monitor the progress of US-Iran negotiations, actual traffic flow data in the Strait of Hormuz, and Chinese economic indicators, as these will determine the speed and depth of the oil price decline. Short-term volatility may persist, but the medium- to long-term downward trend is relatively clear.