Brent crude plunges 4% to $77 as Hormuz tanker traffic resumes

Brent crude slid 4% to $77.39 a barrel Monday as tankers resumed transit through the Strait of Hormuz, signaling the fastest de-escalation of a supply crisis that pushed prices above $115 in April.

"The release of those barrels is additional supply for the market," Giovanni Staunovo, an analyst at UBS, said.

WTI crude fell to $74.45, while the more-active August contract settled at $73.36. Two crude tankers carrying just under 2 million barrels sailed through the waterway Monday, ship tracking data showed, after the US authorized Iranian oil sales through August 21. The United Arab Emirates, Kuwait and Iraq have offered more crude to customers in the past week.

The rapid normalization threatens to flood a market already bracing for a surplus. ANZ expects 2 million to 3 million barrels per day to be restored within four weeks, with a further 2 million to 3.5 million potentially recoverable by the third quarter. Citi has cut its Brent forecast to $75 for Q3 and $65 for 2027, while the IEA projects global supply could surge by 8 million barrels per day next year.

Supply Recovery Faces Logistical Hurdles

Iraq plans to restore crude production gradually to between 4.2 million and 4.3 million barrels per day, its deputy oil minister for upstream affairs said Sunday. But ANZ cautioned that early gains will be driven by shipping logistics rather than production, with full restoration unlikely this year. Between 1 million and 2 million barrels per day of supply could be permanently or semi-permanently lost, the bank said.

The US Treasury Department issued a general license Monday authorizing the sale of Iranian crude oil, petrochemicals and petroleum products through August 21. High-ranking US and Iranian officials wrapped up their first round of talks in Switzerland under a memorandum of understanding that extends the April ceasefire for at least 60 days. Tehran did not negotiate on its nuclear program and accepted no new commitments, Foreign Ministry spokesperson Esmaeil Baghaei told the official IRNA news agency.

Wall Street Rushes to Reset Price Forecasts

Goldman Sachs cut its Brent forecast to $80 for the fourth quarter, down from $90, and said Persian Gulf exports could return to pre-war levels by the end of July — one month earlier than previously expected. The EIA sees Brent averaging $89 in the fourth quarter and $79 in 2027, with OPEC spare capacity averaging just 2.5 million barrels per day next year, well below earlier estimates.

The price collapse has rippled across asset markets. The 10-year US Treasury yield fell 4 basis points to 4.45% as lower crude prices dragged down inflation expectations to a six-month low of 2.218%. Energy stocks sold off, with Exxon Mobil and Chevron each falling more than 2%, while airlines and cruise operators rallied on lower fuel cost prospects.

The last time Brent traded below $80 was in early March, before the Strait of Hormuz closure sent prices on a two-month surge to $115. The speed of the current decline — 24% in a month — mirrors the velocity of the earlier spike, raising questions about whether the market has overshot on the downside. If supply normalizes faster than the futures curve implies, Brent could test $70 before year-end, a level not seen since September 2025.

This article is for informational purposes only and does not constitute investment advice.