Brent crude has slipped back below USD 100 as markets factor in the prospect of an Iran deal, though recent US strikes on Iranian missile sites and vessels alleged to have been attempting to lay mines in the Strait of Hormuz have tempered expectations. The price is about 10% lower than a week ago. Even so, a swift return of Gulf exports is seen as unlikely, with mine clearance, damaged infrastructure and tanker availability pointing to a phased recovery rather than an immediate restart.
The IEA expects the oil market to remain out of equilibrium until the end of the fourth quarter. In the US, the Energy Information Administration forecasts output to stagnate at current levels in the coming months, and the recent uptick in drilling activity is not viewed as sufficient to drive a strong production response; a much larger increase in the oil rig count would be required.
Logistical Challenges Undermine Rapid Iranian Oil Return
We are seeing the market price Brent crude below $100 a barrel, currently trading near $98, based on hopes for a framework agreement between the US and Iran. This price drop appears to be an overreaction to potential headlines rather than a reflection of near-term supply realities. The market seems to be forgetting the significant logistical hurdles that will delay any meaningful return of Iranian oil.
Clearing mines in the Strait of Hormuz, repairing damaged infrastructure, and chartering a sufficient tanker fleet will take many months, not weeks. Maritime intelligence reports show that while Iran has over 80 million barrels in floating storage, less than a quarter of the necessary tankers have been secured for post-deal export. We see a staggered recovery, where supply only gradually returns to the market.
This isn’t the first time we’ve seen this; after the 2015 nuclear deal, it took nearly a year for Iranian exports to recover by 1 million barrels per day. The current situation involves active conflict and more extensive damage, suggesting the timeline for a return to full capacity could be even longer. Therefore, we expect the supply impact of any deal to be a story for late 2026 or early 2027, not the coming weeks.
Muted US Production Response And Market Implications
On the US side, the production response remains too weak to pressure prices downward. The latest Baker Hughes data shows the US oil rig count at 652, a figure that has risen less than 5% over the past six months despite high prices. For production to ramp up significantly, we would need to see that count climb well above 750, which isn’t happening due to continued capital discipline from producers.
This view aligns with recent forecasts from both the IEA and the EIA, which do not see the market returning to equilibrium before the end of the fourth quarter. Both agencies project that global production will stagnate near current levels through the summer. This confirms our belief that the market remains fundamentally tight.
Given the disconnect between the current price and the sluggish supply outlook, we see an opportunity in the derivatives market. The recent dip provides an attractive entry point for long positions, as we anticipate prices will rebound once the market digests the slow pace of Iranian export normalization. We are considering buying call options with expiration dates in the third and fourth quarters to capitalize on this expected price recovery.
