Oil prices have declined sharply as markets increasingly believe that disruptions from the Iran-US conflict are easing. Brent crude fell from over USD 78 per barrel to around USD 72 per barrel during the week, while WTI dropped to about USD 70 per barrel. Saudi Arabia is expected to reduce official selling prices to Asia, and ADNOC has already lowered Murban crude prices, reflecting weakening market sentiment.
Traffic through the Strait of Hormuz has begun recovering following a US-Iran memorandum of understanding, although vessel movements remain far below pre-war levels and mine-clearance operations are expected to constrain capacity for months. At the same time, Middle Eastern producers are restoring output, with UAE exports reaching record highs and other regional exporters increasing loadings. Overall, markets appear less responsive to geopolitical escalations than they did earlier in the year.
On supply, the IEA forecasts that global oil production will fall by 3.9 Mn bpd in 2026 to 102.4 Mn bpd because of ongoing conflict-related disruptions, despite signs of recovery in Middle Eastern exports. However, it expects a strong rebound in 2027, supported by non-OPEC+ producers, increased production in the Americas, and releases from strategic reserves. Inventories remain under pressure, with OECD government stocks at their lowest levels since 1990.
Demand-side trends are increasingly influenced by electric vehicle adoption. Goldman Sachs estimates that accelerated EV uptake could reduce global oil demand by up to 320,000 bpd by the end of 2027. Rising EV penetration, particularly in China and other Asian markets, is occurring alongside slowing demand growth.
Downstream, the IEA has become more pessimistic on refinery throughput, citing weaker activity in China, lower utilization at independent refineries, and operational disruptions in Russia, including extended outages at key refining facilities.