Key takeaways

  • Oil prices fell to multi-month lows on the US and Iran’s preliminary peace deal.
  • Analysts warn it may be some time before oil and gas prices return to prewar levels.
  • Risks to oil prices include shipping insurance, mines, further closure of the Strait of Hormuz, and a resumption in hostilities.

The United States and Iran may have reached a preliminary agreement to end the war that US President Donald Trump launched in February. However, analysts warn that it may be some time before oil prices return to prewar levels.

In the wake of the agreement announced late Sunday, Brent crude oil futures have fallen roughly 30% from their mid-crisis peak to around $80. That’s $10 above where oil was trading when US and Israeli attacks on Iran started on Feb. 28. US West Texas Intermediate futures fell to roughly $78. But with the details of the deal still unpublished and many key issues apparently unsettled, caution remains.

“Don’t expect a return to prewar levels soon,” says Morningstar director of equity research Allen Good. “Shipments will still take time to reach the market, while storage will need to be replenished. This will likely set a higher floor for oil prices than before the war, when markets were pricing in an expectation of oversupply in 2026.”

An uncertain oil production outlook

On Monday, Goldman Sachs reduced its Brent crude oil price forecast for the end of the year to $80, while WTI is seen closing out 2026 around $75. The bank sees Persian Gulf oil exports normalizing to prewar levels by the end of July, with regional production resuming by October.

Morningstar’s Good says that assuming a speedy reopening of the crucial waterway, which carries about a fifth of the world’s seaborne oil and gas, exports could resume quickly—first from supplies already in tankers, then from shut-in production soon after. “This should relieve pressure on the global supply shortage, which had largely relied on storage draws to keep oil prices contained.”

Some analysts express more skepticism. Capital Economics expects it to take two to three months for oil production to return to 80% of prewar levels. It similarly sees oil prices ending the year roughly around current levels, though it warns of a potential near-term spike.

“I wouldn’t rule out the oil price rising in the near term,” says David Oxley, chief climate and commodities economist at Capital. With details of the deal still scarce, he suggests energy markets may have sold off prematurely at the start of this week. Meanwhile, renewed political focus on energy security and replenishing depleted global inventories could maintain upward pressure on oil prices.

“The push to rebuild stocks could prevent oil prices from falling further than they might have,” Oxley notes.

LNG prices seen climbing this year

Liquefied natural gas prices could take longer to recover. The European benchmark price for natural gas, the Dutch futures contract TTF, hovered around EUR 42 per megawatt hour on Tuesday, up around EUR 12 from prewar levels. However, Capital Economics suggests prices could spike again during winter in the Northern Hemisphere, with prices averaging around EUR 55 per MWh.

“The LNG market will have more scarring over the coming months,” says Oxley, who adds that it may take several years for production to normalize. The forecast follows Qatari warnings in March that Iranian attacks had wiped out 17% of its LNG capacity for up to five years. Reports Tuesday nevertheless suggest that Qatar is aiming to restore most of its export capacity within two months.

What if the US-Iran peace deal fails?

Markets await further details of the memorandum of understanding between the US and Iran, which is scheduled to be signed on Friday in Switzerland. Key risks to a quick resumption of oil flows include the potential presence of mines in the Strait, a renewed closure of the shipping route by Iran, and a broader return to regional hostilities. Should any of those factors result in further obstruction to the Strait through the rest of the year and into 2027, Brent prices could hit $130, according to Goldman.

In the meantime, if the deal collapses, analysts warn that transit flows through the Strait would likely return to a trickle, with oil prices resurging within a few months as inventory levels fall to critical levels. Before the deal, Wood Mackenzie forecast US crude inventories could hit critical levels within one to two months, potentially pushing prices to $140 per barrel.

“If it fails, [markets could expect] a reversion to the current situation, with some volumes leaking out of the Strait, but at much lower levels than before the war and a continued reliance on storage. This is unsustainable, and with inventories drawn down quite far already, prices would likely move much higher to spur the needed demand response,” Morningstar’s Good says.