Oil traders are undoing nearly a year of war-premium pricing. Benchmark crude forecasts have been cut sharply as shipping through the Strait of Hormuz returns to something close to normal, easing the worst fears that followed February's outbreak of fighting between Israel, the United States and Iran.
At the height of the conflict, Iran's closure of the strait — the narrow waterway through which roughly a fifth of the world's seaborne oil passes — sent Brent crude above $120 a barrel and briefly toward $126, levels not seen since 2022. Shipping data at the time showed traffic through the chokepoint had collapsed to a handful of vessels a day, down from a prewar average near 120, and the U.S. Energy Information Administration raised its own 2026 Brent forecast to $87 a barrel from $82 as it assumed disruptions would persist for months.
Scenario planning gives way to retreat
That worst case never fully materialized. With the strait reopened and tanker traffic recovering, analysts have spent recent weeks walking their price targets back down. Goldman Sachs, which had warned Brent could average $120 a barrel in the third quarter if the closure dragged into May, instead models a much calmer path once shipping normalized — closer to the low-$80s range the bank had penciled in for a quick resolution, according to a note from analyst Daan Struyven, who cautioned even then that "the situation is fluid" given the risk of renewed Iranian threats.
That caution has largely been borne out: a ceasefire has held, Hormuz traffic has rebuilt, and benchmark forecasts across Wall Street have converged toward the mid-$80s for Brent in the near term, with a further drift down expected into 2027 as the geopolitical premium continues to unwind.
Who wins, who loses
The retreat is a relief for U.S. drivers and for the Fed, which has been fighting a 2026 inflation forecast that the OECD now pegs at 4.2%, driven partly by this year's energy spike. Retail gasoline, which the EIA had projected averaging $3.78 a gallon amid the worst of the disruption, is likely to come in below that as crude eases. It is less welcome news for producers who had budgeted around triple-digit oil, and for oilfield-services firms that geared up for a prolonged supply squeeze that now looks unlikely to return absent a fresh escalation in the Middle East.
Markets are not pricing the risk at zero. Iran has not formally reopened the strait to all traffic without restriction, and analysts note that a single incident — an attack on a tanker, a reimposition of Iranian naval patrols — could reverse the recent calm within days, much as it did in February. For now, though, the trade that dominated energy markets for most of 2026 is unwinding, and traders are shifting their attention back to more conventional drivers of oil prices: OPEC+ supply decisions, demand growth in Asia, and the Fed's own rate path, which will shape how much fuel the broader economy burns through the end of the year.
