A Middle East ceasefire raised hopes of peace among investors. Yet deep US-Iran tensions persist, and rebuilding areas hit by the conflict will take time. Let’s discuss this topic and make a trading plan for Brent.
The article covers the following subjects:
Major Takeaways
- Oil prices plummeted too quickly amid the de-escalation of the conflict.
- The US and Iran are still far apart.
- Rebuilding damaged infrastructure will be a long process.
- Consider buying Brent once it exceeds $98.70 per barrel.
Weekly Fundamental Forecast for Oil
Easing Middle East tensions sparked euphoria, sending Brent prices plunging at their fastest pace since the pandemic. So investors started to bet on a swift return to pre-war market conditions, expecting bearish pressure to re-emerge. In reality, however, such a quick shift looks unlikely: even restoring operations in the Strait of Hormuz could take weeks, let alone rebuilding damaged energy infrastructure across the Gulf region.
The US Energy Information Administration estimates show OPEC output fell by 7.5 million bpd in March. In April, the decline is expected to deepen to 9.1 million bpd, even with the Strait of Hormuz reportedly open. A partial recovery is predicted only in May, with output losses projected at 6.7 million bpd. Against this backdrop, the EIA has raised its 2026 Brent price forecast to $96 a barrel from $79.
Oil Futures Curves
Source: Wall Street Journal.
A steep premium of near-term futures over longer-dated contracts underscores that the market remains tight. This points to a significant supply shortfall in the spot market, allowing producers outside the Middle East to make substantial profits.
Russian Urals crude prices are steadily rising. This grade, delivered to India, is trading at a premium to Brent, reflecting strong demand.
Urals–Brent Spread
Source: Bloomberg.
With Brent supply constrained by the closure of the Strait of Hormuz, alternative grades have come into focus, with WTI at times trading above Brent. Similar strength has been seen in North Sea Forties and Arab Light, which hit record highs of $146–$150 a barrel before the US-Iran truce.
The drop in oil prices was driven by a wave of optimism sweeping the market, as investors concluded the worst was over. Despite their differences, both the US and Iran appear to favor de-escalation, keeping the risk of renewed conflict low. However, despite pressure from Donald Trump, the Strait of Hormuz remains largely closed. Only a handful of tankers are passing through, and even those require Tehran’s approval.
Moreover, Israel’s strikes on Lebanon, home to Hezbollah, are unlikely to sit well with Tehran. The ceasefire was supposed to include a pledge not to attack Lebanon, but the US says the country is not actually covered by the deal.
Weekly Trading Plan for Brent
The Strait of Hormuz is still far from fully reopening, and restoring the region’s energy infrastructure will take even longer. This is supporting Brent prices and encouraging traders to buy on dips around $90.50 and $95.50, or above $98.70.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
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