U.S. Vice President JD Vance’s severe warnings of potential repercussions for Saudi Arabia in oil prices led to a modest move higher in Brent crude on Thursday. In a public warning to Israel, Vance, on behalf of the White House, spoke out against additional military action against Hezbollah forces in Lebanon backed by Iranian troops.
The remarks immediately sparked serious questions in global financial markets of the viability of the fragile U.S.-Iran ceasefire deal. This pushed Brent futures to $79.85 a barrel, up 30 cents, or 0.38%. On the other hand, U.S. West Texas Intermediate (WTI) fell 19 cents, closing at $76.60 a barrel.
Brent had picked up its lowest price in trading since March 2, the first day after the initial U.S.-Israeli strikes on Iran, before Vance’s strong warning. WTI, meanwhile, also had fallen to its lowest since March 4.
The Strait of Hormuz and Global Supply Fears
Oil analysts say there is still much focus on the up and down of the Strait of Hormuz. Prior to the war, about 20% of the world’s total amount of oil passed through this vital sea route.
Again, Capital partner John Kilduff said that the vice president’s remarks regarding Israel have “put things back on edge. He stressed that the market has already factored in the complete resumption of oil supplies through the strait, which will immediately shake the market if there is anything that goes wrong in the geopolitical scenario or if the flow of oil is not expected.
The peace, though fragile, that prevails today is built on a 14-point U.S.-Iran memorandum of understanding. This complicated diplomatic process sets a negotiational period of 60 days. Iran has agreed to let the passage of commercial ships through the Strait of Hormuz without paying any toll during this time.
Under the agreement, the capacity of maritime traffic is to be promptly restored to its pre-war status within 30 days. Most importantly, the ceasefire provisions are in effect for both countries’ regional partners. This is especially true of the war in Lebanon, where we’ve been seeing the IDF launch an active air and ground strike against Hezbollah, too.
Still, there are a few major diplomatic problems that are left to be handled inside the initial deal, and they haven’t really been settled yet. Difficult issues – like the future of Iran’s nuclear program – have been put on the back burner. Moreover, the agreement asks the United States and its global allies to come up with a massive $300-billion economic plan for the funding of Iran’s post-war recovery.
Future Projections and Market Stability
However, industry experts say they’d not expect a sharp drop in oil prices due to the diplomatic progress. The price floor is taking shape as more and more is being bought to replace low stocks, and world demand is picking up.
Goldman Sachs investment analysts estimate that Gulf exports will stabilize back to pre-war levels by the end of July, while regional crude production is expected to be back to normal by October. They estimate that this normalization will take between about 70% and 75% of the pre-war level of Hormuz flows, which is 13 million barrels per day.
Likewise, financial analysts at BNP Paribas are not expecting oil to rebound to $60-$70 per barrel as it did earlier this year. In a recent note, the bank said that it believes $75 per barrel represents a “durable floor” for the foreseeable future due to continued supply shortages and strong global demand.
In the meantime, however, consumption patterns are changing around the world. According to a new report by the research arm of China’s state-owned energy company, China, the world’s second-largest oil consumer, will see a consumption of 753 million metric tons of oil in 2026. This is 4.9% down from 2025, kinda, like a national change towards alternative energy sources, while the worry about high and sustained oil prices just stopped oil reserves from growing, or at least it didn’t help them.
Ukrainian military drones have also hit a key oil refinery in the Russian capital a second time this week, which piles on to broad anxieties across the global supply chain, and it also improves their long-distance strike capability, basically.
