Oil prices have dropped below $80 per barrel as markets respond to easing geopolitical tensions and renewed expectations that key Middle East shipping routes may fully reopen. The move comes alongside a warning from the International Energy Agency (IEA) that OECD oil reserves have fallen to their lowest level in more than three decades.
Oil prices ease as Strait of Hormuz outlook improves
Global benchmark Brent crude slipped under $80 for the first time since early March, as traders reacted to progress in a US-Iran framework agreement that could restore normal shipping through the Strait of Hormuz. The waterway is a critical global energy route, responsible for a large share of oil and LNG exports.
Markets have increasingly priced in the possibility that supply disruptions linked to the Gulf conflict may be coming to an end. This shift in expectations has helped push oil prices down by more than 30% over the past month.
OECD oil reserves fall to 1990 levels
At the same time, the IEA confirmed that strategic oil reserves in OECD countries have dropped to their lowest level since 1990. Governments have drawn on emergency stockpiles to stabilise markets during recent supply disruptions linked to the Middle East conflict.
The agency warned that while short-term pressures have eased, global energy systems remain vulnerable due to depleted reserves and ongoing uncertainty in production and transport routes.
Oil demand forecast revised lower
In its latest Oil Market Report, the IEA also cut its global demand outlook, saying consumption is expected to decline through 2026. The agency linked the downgrade to higher fuel prices and continued market disruption affecting global trade flows.
A recovery is still expected in 2027, although the pace will depend on how quickly supply chains normalise and whether geopolitical stability holds.
Market optimism drives further price moves
Traders have responded to expectations that the Strait of Hormuz could reopen fully in the coming days, with some reports suggesting transit conditions may return to normal operations without additional charges.
Brent crude traded around $79 per barrel, while US benchmark WTI stood near $76, reflecting continued downward pressure on energy markets. European gas prices also eased, falling below €42 per megawatt-hour.
Despite the sharp decline, analysts caution that recovery in global energy production may take time, particularly given infrastructure damage and logistical challenges in key export regions.
Uncertain outlook for global energy markets
While optimism has grown over a potential diplomatic breakthrough, analysts warn that several risks remain unresolved, including negotiations over Iran’s nuclear programme and regional security conditions.
Attention is also focused on major LNG infrastructure in the Gulf, where any disruption could quickly tighten global supply again.
For now, markets are balancing easing supply fears with historically low reserve levels, leaving global energy prices highly sensitive to any further developments.
