A Strait answer would be nice

We’re sorry to be a killjoy, but while everyone is distracted by shiny rockets, we’ve got to bring you back down to earth to talk about oil.

Oil prices fell to a three-month low this morning after President Donald Trump suggested that the US was nearing a deal with Iran to reopen the Strait of Hormuz. It’s yet another moment of whiplash after a week full of highs and lows for oil traders. And whether Trump is right this time matters more than usual, because the world’s oil supply is running on fumes.

Since the Strait closed, the world has stayed supplied largely by drawing down stored oil, and those stockpiles are hitting dangerously low levels:

• US government reserves of oil, gas, and other fuels are scraping their lowest levels since 1983.
• Aaron Brady, an energy analyst at S&P Global, told Axios that if the strait stays closed for just one more month, US inventories will approach minimum operating levels, with other countries close behind.
• Stockpiles across the world, including in Japan, South Korea, and Europe, are dwindling as well.

Say more…

Goldman Sachs analyst Daan Struyven laid out three potential pricing scenarios in a note published yesterday:

• In a benign scenario, if exports out of the Gulf normalize by mid-July, Brent crude would average only $70 in the first quarter of 2026, and fall to $60 in 2027.
• In Goldman’s “adverse” scenario, Brent crude would average over $110 in the fourth quarter of 2026, assuming exports out of the Gulf normalize by the end of October.
• In the ominously titled “severely adverse scenario,” in which the strait remains disrupted through 2027, Brent crude would rise to an average $140 in 2027.

But compared to research from Macquarie, Goldman’s forecast is pretty optimistic. A note from the Australian multinational argues that if the Strait of Hormuz is still closed by Labor Day, Brent crude prices could skyrocket up to $150 a barrel.

So far, the oil market has bent without breaking throughout the conflict, which cuts both ways. It means doomsday predictions have repeatedly missed, and it also means analysts really don’t know what comes next. Meanwhile, others are skeptical that—even if a deal is reached—a disrupted market can bounce back that quickly. —LB