US-Iran Peace Pact Reopens Strait of Hormuz Oil Flow

The Federal government of the United States and Iran signed a memorandum of understanding to de-escalate a conflict that began in February 2026. The agreement aims to ensure the Strait of Hormuz remains open for energy shipments following a period of volatility characterized by military strikes and an Iranian attack on a cargo vessel. As shipping restarted in early July, oil prices remained steady, with Brent crude hovering around $72 per barrel.

Gulf producers responded quickly to the reopening. OPEC production increased by 3.3 million barrels per day in June, and the Government of Kuwait raised its output to 1.65 million barrels per day. Saudi Aramco shifted to spot pricing to accelerate sales in Asia, as supertankers resumed passage through the waterway. These supply increases, alongside releases from the US Strategic Petroleum Reserve, shifted the market structure into contango.

Financial institutions and energy experts are now divided on the long-term impact. Citigroup and Morgan Stanley predict a supply glut, with Citigroup forecasting Brent crude could drop to $60 per barrel by year-end. JPMorgan commodity strategists warned that the returning supply may collide with weak Chinese demand. Conversely, Fereidun Fesharaki of NexantECA argued that a lasting peace is unlikely and that fears of a glut may be overblown because geopolitical tensions persist.