After the agreement between Washington and Tehran, major banks reduce their expectations for the price of oil economy

Morgan Stanley and Goldman Sachs lowered their forecasts for oil prices in the coming months, after announcing an initial agreement between the United States and Iran that includes the reopening of the Strait of Hormuz, which strengthened bets on the return of oil supplies and the decline of fears associated with the disruption of exports from the Gulf region.

Morgan Stanley said that it lowered its expectations for the price of Brent crude in the fourth quarter of this year by $15 per barrel, to $80, following the signing of the initial agreement to end the war in the Middle East.

The bank explained in a note issued yesterday, Monday, “From this standpoint, we expect that it will take several weeks for the movement of oil tankers to return to normal, and we expect the return of 50% of production by September and 80% by December, which represents a slightly faster pace than before.”

In the same direction, Goldman Sachs lowered its expectations for the price of Brent crude in the fourth quarter of the year from $90 to $80 per barrel, and it also lowered its estimates for the average price in 2027 from $80 to $75.

The bank’s analysts said in a research note that they now expect Gulf exports to return to pre-war levels by the end of July, compared to their previous expectations of the end of August.

These reviews came after oil prices fell by about 5% in yesterday’s session, Monday, to their lowest levels since March 10, following US President Donald Trump’s announcement of signing a memorandum of understanding to end the US-Israeli war with Iran, which closed the Strait of Hormuz during the conflict.

Cautious optimism

About 20% of the world’s oil and liquefied natural gas supplies passed through the strait before the outbreak of war, making any developments regarding its reopening a direct impact on global markets.

By Tuesday morning, Brent crude futures fell 0.3% to $82.94 per barrel, while US West Texas Intermediate crude futures fell 0.1% to $80.66 per barrel.

Goldman Sachs also expected the average price of West Texas Intermediate crude to reach $75 per barrel in the last quarter of this year and $70 in 2027, indicating expectations of a relatively stronger recovery in demand during the second half of 2026 and until 2027, supported by improved purchasing power.

Despite the more optimistic outlook on supplies, the bank warned of the continued risks associated with the security situation in the region, and explained that the return of Gulf exports to pre-war levels may be achieved with an increase in oil flows through the Strait of Hormuz by about 12 million barrels per day compared to current levels.

He added that Saudi Arabia and the UAE may boost production at a greater pace if commercial stocks in OECD countries continue at low levels, and Iran may exceed its previous production levels if the sanctions imposed on it are eased.

On the other hand, Goldman Sachs analysts indicated that the resumption of confrontations or the targeting of ships in the region may keep exports and production at low levels for a longer period, pointing out that removing any potential sea mines may take a long time and delay the complete return of oil flows.