Brent crude falls below $80 as Strait of Hormuz reopening nears

The reopening of the Strait of Hormuz could add millions of barrels of supply to global markets, reshaping the oil price outlook for the second half of 2026.

Brent crude fell below $80 a barrel for the first time since the opening salvos of the US-Iran conflict as traders priced in the fast reopening of the Strait of Hormuz following a ceasefire agreement.

"The market is pricing in a swift normalization of flows through the strait, which would remove the single biggest supply risk premium embedded in crude prices since late February," said Omar Tariq, commodities analyst at Edgen.

Brent futures traded at $78.50 in early Asian trade Wednesday, down from highs above $95 during the peak of the conflict. The US-Iran memorandum of understanding, signed Sunday and set for formal ratification Friday in Switzerland, extends the April ceasefire by 60 days and includes a US commitment to waive sanctions on Iranian crude exports. The G7, meeting in Evian-les-Bains, endorsed the deal and said a coalition led by Britain and France would help secure shipping once the waterway reopens.

The reopening resolves the most acute supply disruption to global oil markets since the 2019 Abqaiq attacks, but the path to full production recovery faces hurdles. Middle East oil and gas output will take months to fully restore, industry officials said, while Israel's continued military operations in Lebanon and its refusal to withdraw from southern territory keep a geopolitical risk premium embedded in prices.

Supply Wave Looms as Sanctions Waiver Opens Iranian Exports

The US waiver on Iranian oil sanctions under the deal raises the prospect of millions of additional barrels returning to market. Iran was exporting roughly 300,000 barrels a day to India alone before sanctions were reimposed, and Indian refiners have historically favored Iranian crude for its quality and compatibility with domestic refining infrastructure. The return of Iranian supply would increase competition among producers and improve the negotiating position of major importers.

The G7 leaders also committed to accelerating the diversification of energy supply routes to reduce global vulnerability to the Strait of Hormuz, a chokepoint that carries nearly one-fifth of global oil and gas trade. That long-term structural shift could reshape investment flows into alternative pipeline routes and renewable energy projects, though such changes will take years to materialize.

India Stands to Gain Most From Lower Oil Prices

For India, the world's third-largest oil consumer, the benefits of the reopening are immediate and substantial. The country sources about half of its crude imports from West Asia, and the disruption had pushed up energy costs, widened the current account deficit and weakened the rupee. Every $10-a-barrel increase in crude prices raises India's net oil import bill by roughly $13 billion to $14 billion and widens the current account deficit by about 0.3 percent of GDP, according to ICRA estimates.

With Brent now below $80, economists expect India's current account deficit could shrink by as much as $15 billion while easing inflationary pressures across transport, logistics and manufacturing. Lower fuel costs would also provide fiscal breathing room by reducing pressure on subsidies.

The 60-day negotiation window will test whether the ceasefire can hold. Iran's stockpile of highly enriched uranium has not been surrendered, its ballistic missile capabilities remain intact, and its support for Hezbollah in Lebanon has not ended — all issues the US president set as war aims but did not achieve in the memorandum. If the talks collapse, Trump has warned he would "go back to dropping bombs right smack in the middle of their head," a scenario that would reverse the oil price decline and potentially push Brent back above $100.

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