Brent Oil Drops Below $80 For First Time In 3 Months! Goldman Sachs and Morgan Stanley both cut their price targets as US-Iran deal shocks

Brent crude fell to a three-month low as major Wall Street banks lowered their oil price forecasts after the US and Iran reached an interim agreement to reopen the Strait of Hormuz, causing violent shocks in global oil markets.

Brent crude oil fell by 4% on Tuesday, falling below $80 per barrel in the session, the longest round of sustained decline this year. Trump said the Strait of Hormuz will reopen on Friday, when the United States and Iran are expected to sign an interim memorandum of agreement in Switzerland, but the full text of the agreement has not been released.

Goldman SachsAndMorgan StanleyBoth have lowered their oil price forecasts for the next few quarters, and the benchmark prices of Dubai crude oil and Murban crude oil in the Middle East have simultaneously turned into a bearish futures premium structure, indicating that the market expects oversupply.

This round of oil price declines has pulled Brent back to its lowest level since early March, largely erasing all of its gains during the conflict and also helping ease inflationary pressures as the Federal Reserve this week assesses where interest rates are headed.However, there is still plenty of uncertainty about the implementation details of the agreement, including shipping safety, passage rules and whether the choke point, which assumed about a fifth of the world's oil supply before the war, can maintain free passage.

Goldman Sachs, Morgan Stanley cut oil price forecasts simultaneously

Goldman Sachs analyst Daan Struyven and others lowered their Brent crude oil forecast for the fourth quarter of 2026 to $80 per barrel in a research report, $10 lower than the previous forecast; The full-year 2027 average price forecast was lowered from $80 to $75.

Meanwhile, Goldman Sachs brought forward the timing node for the restoration of Persian Gulf exports to pre-war levels from the previously expected end of August to the end of July, and estimated that WTI crude oil will average $75 in the fourth quarter of 2026 and $70 in 2027.

Morgan Stanley analyst Martijn Rats and others wrote in the report: "There are still plenty of details to be negotiated and key risks remain, but for now, this is an important step towards de-escalating the conflict and increasing oil exports from the Strait of Hormuz." Morgan Stanley expects Persian Gulf production to recover by 50% by September and 80% by December, a slight acceleration from previous forecasts.

Details of agreement unclear, market uncertainty remains

Persian Gulf energy officials said they had received a flood of buyers asking whether crude oil could be transported via the Strait of Hormuz again, while shipping executives and traders said more clarity was needed before ships could be sent to the route, Bloomberg reported. European allies also have reservations about whether oil and LNG can return to circulation so quickly.

RBC Capital Markets takes a more cautious stance. Helima Croft, an analyst at the bank, and others noted in the report:"We believe it will take months to return to the levels we had on February 27 [before the outbreak of the war]. Peak flows in the Strait of Hormuz may actually be history."

Inventories have fallen to historic lows as supply shock has been on unprecedented scale

The U.S. strategic oil reserve has fallen to its lowest level since 1983.Goldman Sachs estimates that oil flows in the Persian Gulf have recovered from a low of less than 30% of normal levels in early March to about 50% in mid-June.

Goldman Sachs also estimated that the scale of the supply shock in the Middle East was as high as 14 million barrels per day, the largest single oil supply shock in history. However, due to the significant flexibility of China's demand, the actual supply gap was about 5 million barrels per day in the second quarter, which was smaller than the scale of the shock.

Goldman Sachs expects that the global oil market will have a large oversupply of 3.2 million barrels per day in 2027, but believes that the price of Brent crude oil can still remain around $75 by then, because after the large-scale inventory consumption in the first half of 2026, OECD commercial inventories are unlikely to climb to an extremely high level, and a certain degree of geopolitical security premium will provide support for oil prices.

Upside and Downside Risks Coexist, Goldman Sachs Net Tilt Upside

In the upside scenario, if the Strait of Hormuz continues to be blocked until 2027, Brent crude oil may rise above $130 per barrel by the end of 2026, and the average price will reach $105 in 2027. Under the downside scenario, if the Persian Gulf exports return to normal in early July, the superimposed demand continues to be weak and the supply increases beyond expectations, the average price of Brent crude oil may fall below $70 in the fourth quarter of 2026 and below $60 in 2027.

In addition, Goldman Sachs pointed out that if Iran is exempted from sanctions, its output may exceed the pre-war level, which will further increase the uncertainty on the supply side. Abu Dhabi National Oil Company (Adnoc) has issued the third round of Persian Gulf crude oil bidding in succession, and the UAE continues to seek to expand exports, which also confirms the market's expectation of supply recovery to some extent.