Following a memorandum of understanding between the United States and Iran that could lead to the Strait of Hormuz reopening, Wood Mackenzie forecasts that Brent will average $78 a barrel in 2027. By the fourth quarter of that year, prices could ease to $70.

Noting that it expects prices to average $92 in 2026 because of the conflict, Wood Mackenzie says the journey to $70 will be bumpy. “Alternating periods of elevated and depressed prices are likely as the market searches for equilibrium with recovering demand, inventory build and supply out of sync,” it warns.

The forecast assumes that traffic through the Strait normalizes in August. “Once the Strait has reopened, demand will surge, from refiners desperate to lift utilization rates to storage operators, refiners and governments eager to top up commercial inventory and strategic petroleum reserves,” Wood Mackenzie assesses. “Around 60 million barrels of oil held in vessels trapped in the Gulf will quickly reach consumer markets once the Strait is deemed safe for transit.”

The conflict has removed an estimated 11 million barrels a day of supply from the market, according to the firm. “Wood Mackenzie projects 70% of shut-in volumes could return within three months of the Strait reopening, and 90% within six months,” it says. “The final one million barrels per day will take considerably longer.”

Difficult Negotiations

The revised forecast assumes the negotiations go well. The MoU calls for the United States and Iran to reach an agreement by August 18. However, Wood Mackenzie cautions that the negotiations may need to be extended or could fail.

“Tensions abound—not least, Israel’s apparent rejection of restrictions to its ongoing action in Lebanon. Other bones of contention between the U.S. and Iran surround the timing and manner of reopening,” Wood Mackenzie relates. “The U.S. administration hopes the Strait will be reopened within two weeks to 30 days; Iran’s state press has said it will ‘reopen under Iranian arrangements.’ Iran’s intention to limit transit to seven-hour weekday times shows it believes it still has leverage.”

The countries reached an MoU partly because of inventory depletion. “On 15 June, President Donald Trump acknowledged that U.S. reserves would run out ‘in about four weeks,’” Wood Mackenzie recalls. “Inventories at the Cushing hub had fallen close to the operational floor. Those fundamentals, as much as diplomacy, brought both sides to the table.”

If the closure had persisted, Brent would have gone above $150 a barrel, says Alan Gelder, senior vice president of macro oils for Wood Mackenzie. “The MoU changed that trajectory. But the full value chain, from wellhead through to Gulf Cooperation Council ports, will take the better part of a year to fully recover. Jet crack spreads running at almost double pre-war levels are the clearest signal that this market has not yet normalized. Getting the barrels back is a different challenge from reaching a deal.”

Price Resilience

While the Strait closure has elevated prices, it has had a less dramatic impact than Russia’s invasion of Ukraine in 2022, which pushed Brent to $139. The Institute for Energy Research attributes that more muted response to four factors: China reducing its demand, the U.S. ramping up exports, countries tapping their commercial inventories and strategic reserves, and the U.S. escorting ships through the strait.

Regarding China, IER says that “the world’s biggest oil importer is continuing to prioritize lower refinery use and fuel export limits to manage reduced oil imports from the Middle East, as it did at the onset of the Iranian conflict. State-owned refiners have cut processing rates to record lows, fuel exports have been constrained under wartime measures to preserve domestic supply, and the switch to electric vehicles in China has accelerated.”

Citing Bloomberg, IER says China has resisted the temptation to replace the lost barrels with imports from elsewhere. The Institute explains that China has “filled up its oil inventories to unprecedented levels over the past year,” with estimates putting its total between 1.2 billion an 1.4 billion barrels, more than any other country. For comparison, the U.S. Energy Information Administration says the United States had the second-largest inventory with 413 million barrels in storage as of December 2025.

Speaking of the red, white and blue, the Institute points out that the U.S. increased production during the conflict. “The EIA expects U.S. oil production in 2026 to total 13.72 million barrels per day—130,000 barrels more per day than in 2025,” it shares.

Exports went up as well. “The EIA reported that U.S. net exports of crude oil and petroleum products reached an all-time high of 5.8 million barrels per day in April, with May levels estimated to remain similar. Growing international demand for U.S. diesel and jet fuel is expected to drive higher net exports of both products in the second quarter of 2026 than in the same period in 2025,” IER writes.

“Meanwhile, U.S. refineries are operating at nearly 95% utilization and are delaying their usual spring maintenance, which typically occurs during the shift to summer fuel blends,” IER adds. “Overall, the EIA forecasts that U.S. net exports of crude oil and petroleum products will average 4.2 million barrels per day in 2026, up 1.4 million barrels per day from 2025.”

Withdrawals from the Strategic Petroleum Reserve helped enable those exports. The members of the International Energy Agency agreed to release 400 million barrels from their strategic reserves, with the United States contributing 172 million.

“The U.S. emergency oil reserve is now at 340.3 million barrels—down 75 million barrels, or 18%, since the war with Iran began in late February,” the Institute writes. “The last time the SPR had less oil was July 1983, when the Reagan administration was filling the reserve for the first time. It must be at least 20% full to be operational.”

“Commercial inventories are also low,” IER observes. “Supply at the crude oil hub in Cushing, Ok., has dropped to less than 2 million barrels above its operational floor. Oil prices could increase due to these low inventories if a final agreement is not reached.”

Military escorts also mitigated the closure’s effect on prices, with President Trump reporting that their efforts enabled more than 200 ships carrying 100 million barrels of oil to pass through the Strait during May. For context, IER says that amount is around 16% of the normal volumes in a typical month.

For IER’s full write-up, which includes citations for most of its statistics, see Oil Market Price Shock Has Been Relatively Muted. For more details on Wood Mackenzie’s post-MoU projections, see this Q&A.