Oil prices are almost back where they were before the US-Iran war jolted global markets, but traders are not treating the calm as a clean ending.
Brent crude has slipped back toward $71-$73 per barrel, while West Texas Intermediate is hovering around $68-$70 per barrel, erasing much of the panic premium that took hold earlier this year.
The move is a relief for consumers and central banks, but not yet a resolution for energy markets.
Why are oil prices falling so fast
The speed of the reversal has been striking. Brent settled at $72.92 on July 1, while WTI finished at $69.50, both close to their February 27 levels, the day before the US-Israeli war on Iran began.
Brent was down about 38% in the second quarter after surging 94% in the first, marking its sharpest quarterly fall since the Covid-era crash in early 2020.
The immediate reason is simple: oil is moving again.
The reopening of the Strait of Hormuz, even if partial and uneven, has released stranded cargoes and restored some confidence in shipping routes that had looked paralysed only weeks ago.
That has flipped the market narrative from “shortage” to “temporary supply wave”.
Previously trapped barrels are now reaching buyers, Gulf exporters are trying to restart flows, and traders are reassessing how much geopolitical risk should remain in the price.
Tamas Varga, an analyst at PVM Oil Associates, told CNBC that the conditional reopening of the Strait of Hormuz, Kuwait’s lifting of force majeure declarations, and the end of the US naval blockade had convinced investors that the disruption that once pushed prices above $120 was “well and truly over”.
But he also warned that even if the 60-day truce holds, the recent sell-off may still prove unsustainable in the near term.
The warning traders can’t shake
The problem is that oil markets have priced in relief faster than diplomacy has delivered certainty.
US and Iranian negotiators have been working through indirect talks in Doha, with Qatar saying there had been positive progress.
But the key disputes remain unresolved: maritime control in Hormuz, sanctions relief, frozen Iranian funds and the future of the 60-day negotiating window.
As per local reports, Iran is still seeking international recognition of its control over the strait and has signalled plans to impose shipping tolls once the toll-free period under the interim agreement expires.
That is why traders are watching tanker traffic as closely as they are watching Brent.
The vessel transits through Hormuz rose to 242 in the week to June 28, up sharply from wartime levels, but still far below the 700-plus weekly pre-war pace.
Freight costs have also fallen from crisis peaks, but remain well above long-run averages.
Tiago Lacerda, market analyst at Axi, told CNBC that attention is shifting to whether the physical reopening actually follows through.
Major shipping lines had yet to fully resume transits, while elevated insurance rates showed the market remained cautious about the pace of normalisation, Lacerda said .
Thin inventories, thinner margin for error
The second warning sits in the stockpiles.
US crude inventories, including the Strategic Petroleum Reserve, fell to 734.014 million barrels in the week ended June 26, down from 806.798 million barrels five weeks earlier, according to Energy Information Administration data.
The SPR alone dropped to 325.655 million barrels, while commercial crude stocks fell to 408.359 million barrels.
That leaves the market with less room for another shock.
On paper, supply looks more abundant now because Iran has exported more than 40 million barrels since June 15, according to TankerTrackers data cited by Anadolu.
But David Roche of Quantum Strategy has warned that the apparent abundance may be misleading.
In a note cited by ICRYPEX Research, Roche said Middle East supply looked close to pre-war levels only when inventories and crude already sitting on ships were included.
The risk, he argued, is that the market is drawing down stockpiles rather than enjoying a genuine production recovery.
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