Global oil prices declined sharply, with Brent crude falling to its lowest level since early March, as investors increasingly anticipated a diplomatic breakthrough between the United States and Iran that could ease supply concerns in the energy market.
Brent crude futures settled at $87.33 per barrel, marking a decline of $3.05, or 3.37 per cent, as traders responded to growing expectations that negotiations between Washington and Tehran could eventually lead to the restoration of normal oil flows through the strategically important Strait of Hormuz.
Market sentiment was further influenced by reports suggesting that nuclear-related discussions between the two countries could proceed within a 60-day framework following the signing of a memorandum. Analysts said optimism surrounding a possible agreement has reduced fears of prolonged disruptions to global energy supplies.
The Strait of Hormuz remains a focal point for energy markets because it serves as a critical transit route for roughly one-fifth of global oil and liquefied natural gas shipments. Concerns intensified after Iran announced a complete closure of the waterway and warned vessels against passing through the area. However, US military officials indicated that commercial shipping activity had continued despite the tensions.
Energy analysts noted that expectations of a diplomatic settlement have become a major driver of oil prices. Nevertheless, they cautioned that supply risks remain elevated because global and regional oil inventories are relatively low. Even if an agreement is reached, restoring stable and uninterrupted oil flows could take time.
Some market observers warned that if shipments through the Strait of Hormuz do not normalise in the coming weeks, tightening inventories and stronger seasonal demand could trigger another sharp rise in crude prices later this year.
Meanwhile, longer-term forecasts remain mixed. Investment bank Goldman Sachs lowered its average Brent price forecast for 2027 to $80 per barrel, citing expectations of increased supply and softer demand. However, it maintained that geopolitical risks and precautionary stockpiling could continue to support prices.
Separately, the Organisation of the Petroleum Exporting Countries (OPEC) revised down its forecast for global oil demand growth in 2026 for a second consecutive time, reflecting concerns over the pace of economic activity. Despite the downgrade, the producer group expects demand growth to strengthen again in 2027, signalling continued confidence in the long-term outlook for global energy consumption.
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