Global oil market expectations shifted sharply after progress emerged in peace negotiations between the United States and Iran. As concerns over supply disruptions eased, major financial institutions revised their oil outlook for late 2026 and 2027.
The change reflects growing market confidence that energy flows may recover faster than previously expected. In particular, expectations surrounding shipping activity through the Strait of Hormuz have played a central role in changing price forecasts.
As a result, several major banks now expect lower oil prices compared with earlier projections.
Morgan Stanley Lowers Brent Crude Outlook
Morgan Stanley revised its forecast for Brent crude following recent geopolitical developments.
The bank now expects Brent crude to average $90 per barrel during the third quarter of 2026 and $80 per barrel in the fourth quarter of 2026.
Previously, the institution had projected an average Brent price of $100 per barrel during the third quarter. However, the fourth-quarter estimate remained unchanged.
Analysts linked this adjustment to improving expectations around regional stability and energy supply recovery.
“Much is still to be negotiated, and key risks remain, but for now, this is a key step towards a de-escalation of the conflict and higher oil exports via the Strait of Hormuz,”
According to this outlook, tanker movement could recover rapidly once shipping activity normalises through the critical waterway.
Goldman Sachs Also Turns More Cautious on Oil Prices
Goldman Sachs also adjusted its expectations following the changing geopolitical environment.
The bank reduced its Brent crude forecast for the fourth quarter to $80 per barrel, compared with its earlier estimate of $90 per barrel.
At the same time, it lowered its average Brent forecast for 2027 to $75 per barrel, down from $80 previously.
This revision reflects expectations that tanker traffic through the Strait of Hormuz could fully recover by the end of July.
Consequently, analysts now see reduced pressure on global energy supply and fewer risks of prolonged export disruption.
Citi Projects Even Lower Oil Prices
Among the major institutions revising expectations, Citi presented the most cautious outlook.
The bank lowered its Brent crude forecast for the current period and expects prices to soften further moving forward.
Its revised projection places Brent at $75 per barrel during the third quarter, followed by an average of $70 per barrel during the final quarter.
For 2027, Citi expects Brent crude to average $65 per barrel, significantly lower than its earlier forecast of $80 per barrel.
This outlook suggests that markets may increasingly focus on supply recovery rather than disruption risks.
Why the Strait of Hormuz Remains Central to Oil Markets
The latest market reaction highlights the importance of the Strait of Hormuz in global energy trade.
The route remains one of the world’s most critical shipping corridors for crude exports.
Market sentiment changed after expectations grew that Iran could reopen Hormuz within 30 days under the emerging peace framework.
As confidence improved, traders reassessed supply risk premiums that had supported higher prices earlier.
This shift quickly affected benchmark oil prices.
Brent and WTI Extend Losses Following Market Repricing
Oil benchmarks moved lower after the changing geopolitical outlook reduced immediate concerns about supply shortages.
Brent crude dropped below $90 per barrel and extended losses during trading.
At the time reflected in market updates, Brent traded at $82.51 per barrel.
Meanwhile, WTI crude traded at $80.23 per barrel.
The decline brought international oil prices to their lowest levels since early March.
Lower prices suggest markets currently expect improved energy flows and reduced geopolitical disruption.
What Lower Oil Forecasts Could Mean Going Forward
The latest revisions show how quickly geopolitical developments can reshape commodity expectations.
Oil markets had previously priced in prolonged uncertainty and possible supply restrictions. However, improving diplomatic momentum changed those expectations within days.
Although uncertainty remains, investors are increasingly focusing on recovery scenarios rather than disruption risks.
For now, lower forecasts from major financial institutions indicate that oil markets expect a more stable supply outlook if negotiations continue progressing.
