Oil prices fell after a US–Iran Memorandum of Understanding on 17 June accelerated the recovery of Persian Gulf flows, while demand improved more slowly and releases from strategic reserves continued. The normalisation of supply, previously expected to take most of the third quarter, is now seen as potentially completed by the end of July, tightening near-term pricing conditions in the physical market.
ING’s updated projections put ICE Brent at $80/bbl in 3Q26, easing to $74/bbl in 4Q26 and $70/bbl on average in 2027. The framework assumes no further disruption in the Strait of Hormuz, though the bank also outlines a higher-risk path in which Brent tests $100/bbl in the third quarter. Its balance sheet points to a slight deficit in the third quarter, followed by a surplus in the fourth quarter and then a meaningful surplus in 2027, with near-term support expected once the overhang of tankers stranded in the Persian Gulf clears.
Rapid Supply Recovery and Sluggish Demand
The oil market has come under pressure since the US-Iran agreement on June 17th, which is bringing supply back much faster than expected. As of today, July 9, 2026, this renewed flow of oil from the Persian Gulf is coinciding with softer global demand. We expect this dynamic to define trading for the next several weeks.
This supply increase is confirmed by recent tanker tracking data, which showed a 15% jump in vessels leaving Iranian ports in the final week of June. On the demand side, weakness is evident from China’s latest Caixin Manufacturing PMI, which registered 49.8, indicating a contraction in factory activity. This data supports the view that demand is not keeping pace with the returning supply.
Market Outlook and Risk Management Strategies
Based on this, we anticipate Brent will average around $80 per barrel for the rest of this third quarter before declining toward $74 in the fourth quarter. Traders could consider selling call options with strike prices above $85 for August and September expirations. This strategy allows for collecting premium in what we expect to be a range-bound or weakening market.
However, a significant upside risk exists from renewed geopolitical tensions, which could push Brent toward $100. We saw a tense encounter between US and Iranian naval vessels near the Strait of Hormuz as recently as July 7th. We only need to look back to the 2019 tanker attacks in the Gulf of Oman, which caused Brent futures to spike nearly 4% in a single day, to see how quickly the situation can change.
To protect against this possibility, we think it is prudent to hedge against a sudden price spike. Buying cheap, out-of-the-money call options, such as October contracts with a $95 strike price, offers a low-cost insurance policy. This protects core bearish positions from a sudden escalation in the Persian Gulf.
For now, the market remains in a slight deficit, which should offer some price support and prevent a total collapse in the immediate term. We still project the market will tip into a surplus in the fourth quarter and see a more significant surplus in 2027. This suggests any price strength we see in the coming weeks should be viewed as an opportunity to position for lower prices later in the year.
