WTI edged lower after small gains a day earlier, trading near $68.40 in Asian hours on Friday, as energy markets cooled with easing Middle East tensions. Crude prices softened after diplomatic progress between the US and Iran, following talks in Doha supported by mediators from Qatar and Pakistan, which reduced the geopolitical risk premium that had kept prices elevated.
The pullback also tracked a steadier recovery in commercial shipping through the Strait of Hormuz, a key maritime chokepoint for global oil flows, as tankers resumed transit and supply conditions began to normalise. Saudi crude exports rebounded to about 90% of pre-war levels, supported by improved passage through the waterway, while the United Arab Emirates restored exports to pre-war volumes by rerouting shipments and leaning on a strategic pipeline that bypasses the strait.
Bearish Signals From Diplomatic Breakthrough And Supply Data
With West Texas Intermediate crude trading around $68.40, we see the recent diplomatic progress between the US and Iran as a significant bearish signal for the market. The geopolitical risk premium that was keeping prices high is quickly disappearing. We believe this fundamental shift will pressure oil prices lower over the next several weeks.
This view is strengthened by the latest supply data, which indicates a growing market surplus. The Energy Information Administration (EIA) reported a surprise inventory build of 3.8 million barrels for the last week of June 2026, defying forecasts for a seasonal draw. This suggests that the normalization of shipping in the Strait of Hormuz is already resulting in more supply hitting the market than demand can absorb.
Given this outlook, we are positioning for a continued price decline by purchasing August put options with strike prices around $65. The fading tensions have caused a drop in implied volatility, making these downside hedges relatively cheap to acquire. This strategy allows us to profit from a move lower while clearly defining our maximum risk.
Historical Precedent And Short-Term Trading Strategy
We remember a similar situation in mid-2015, when the original Iran nuclear deal led to a sharp drop in oil prices as the market anticipated a flood of new supply. Brent crude fell nearly 20% in the month following that agreement. While the current context is different, the historical precedent for prices falling on eased Middle East tensions is strong.
The restoration of export capacity from major producers further supports our bearish stance. With Saudi Arabia now back to 90% of its pre-conflict export levels and the UAE at full capacity, we estimate an additional 1.2 million barrels per day are flowing into the global market compared to just last quarter. We will be looking to short futures contracts on any brief price rallies, targeting a move towards the low $60s by the end of the month.
