The Return of the Strait of Hormuz Drives Wall Street Giants to Lower Oil Price Predictions

SadaNews - Major banks on Wall Street have lowered their oil price forecasts for the upcoming quarters, amid growing optimism for the return of crude supplies from the Middle East following the temporary agreement to reopen the Strait of Hormuz.

"Morgan Stanley" and "Goldman Sachs" revised their estimates for crude prices in the last quarter of this year, based on the resumption of oil flows through the Arabian Gulf sooner than expected.

"Goldman Sachs" believes that supplies could fully recover by the end of next month. They expect the average price of Brent crude to reach $80 per barrel in the last quarter of the year, compared to their previous estimate of $90, as indicated in a memo.

On the other hand, "Morgan Stanley" lowered its forecast for the price of benchmark Brent crude, one of the reference indicators for the actual oil market, to an average of $90 per barrel in the third quarter, down from $100 in its previous estimate, expecting it to drop to $80 per barrel during the last quarter of the year.

The bank's analysts, including Martin Ratz, stated in a memo: "There are still many issues to negotiate and substantial risks remain, but at this stage this is an important step toward de-escalation and resuming oil exports through the Strait of Hormuz at a higher pace."

Goldman Expects Quick Return of Gulf Oil Exports

U.S. and Iranian officials are scheduled to meet in Switzerland on Friday to officially sign the agreement, the details of which have not yet been announced.

Oil prices dropped to their lowest levels since early March following the announcement of the agreement, although traders, vessel owners, and producers are still seeking clarifications regarding its terms. Nevertheless, "Goldman Sachs" is counting on a swift resumption of oil flows.

Analysts at the bank, led by Dan Strouven, wrote in a memo: "Although the details of the agreement are still unclear, we currently assume that Gulf Arab oil exports will return to pre-war levels by the end of July," referring to the temporary agreement between Washington and Tehran.

Morgan Stanley: Production Recovery Extends to Early 2027

For its part, "Morgan Stanley" predicts that it will take "several weeks" for tanker traffic to return to its normal pace, due to the need to clear naval mines, restore confidence in shipping and insurance companies, and return the vessels that left the area.

The bank's analysts stated: "Also, to restore production, export tanks must first be emptied, meaning that the pace of empty tankers entering the Gulf may be more significant than the pace of loaded tankers leaving with oil."

They added: "We assume that 50% of the lost production will return by September, and 80% by December, with the remaining quantities expected to be restored by early 2027."