- U.S. President Trump canceled the military strike plan against Iran, significantly easing market concerns about escalating geopolitical conflicts in the Strait of Hormuz, leading to a drop in international oil prices by over 2%.
- Brent crude and WTI crude futures both fell by more than $2 during the day, dropping below the $89 and $86 thresholds respectively, giving back all the geopolitical premiums gained earlier this week due to mutual attacks.
- OPEC has lowered its forecast for global oil demand growth in 2026 for the second consecutive time to 970,000 barrels per day, with weak demand guidance and easing supply tensions jointly pressuring oil prices.
Rapid Reversal of Geopolitical Premiums
U.S. President Trump halted the attack plan against Iran at the last moment, stating that breakthrough progress had been made in negotiations with Tehran. The U.S. revealed that a peace agreement aimed at reopening shipping in the Strait of Hormuz could be signed as early as this weekend. Although Iran remains cautious, stating no final decision has been made, the commodities market has reacted swiftly and decisively. During Friday's Asian trading session, Brent crude futures plunged by $2.11, a 2.3% drop, to $88.27 per barrel; U.S. West Texas Intermediate crude futures fell by $1.90, a 2.2% drop, to $85.81 per barrel.
Fragile Ceasefire Agreement and Potential Supply Turning Point
Despite the temporary easing of geopolitical tensions, financial institutions remain generally cautious about the long-term stability of the oil supply chain. ING pointed out in its latest report that the assumption of a continued ceasefire needs to be approached with caution, as the agreement potentially signed this weekend could easily break due to a lack of core progress in nuclear negotiations. Analysts warn that if the actual supply in the commodities market does not see substantial recovery by the end of July, the global oil market will face a dramatic turning point in supply-demand fundamentals, with low inventories and increased seasonal demand potentially pushing oil prices to the $120 to $130 per barrel range in the second half of the year.
Demand-Side Expectations Face Consecutive Downgrades
While supply-side disruptions are receding, the fundamental support on the demand side is also marginally deteriorating. In its latest monthly report released on Thursday, OPEC lowered its forecast for global oil demand growth in 2026 from the previous estimate of 1.17 million barrels per day to 970,000 barrels per day. This marks the second consecutive month the organization has downgraded its outlook for 2026 oil demand, mainly reflecting the drag on energy consumption from the slowing recovery of major global economies. The fading of geopolitical risk premiums on the supply side and the continued decline in demand-side expectations have resonated in the short term, intensifying the current adjustment pressure on oil prices.
Key Technical Support and Options Pricing Reassessment
From a technical and options market pricing perspective, the core focus of the short-term oil price battle lies in the key price range. IG market analysts point out that although the cooling of the geopolitical crisis has led to a phase of profit-taking in long positions, as long as Brent and WTI crude prices can stay above the critical technical support level of just over $80 per barrel, the overall risk structure of the oil market remains tilted upwards. If the subsequent peace agreement fails to materialize as expected, or if the navigation safety of the Strait of Hormuz is threatened again, the volatility premium in the options market will rise again, prompting a reassessment of market asset pricing.
