Where is the price of crude oil headed? A comprehensive analysis of the energy market under the shadow of the Iran conflict

Overview

On February 28, 2026, a joint US-Israel military operation commenced, plunging the global energy market into its most severe supply shock since the 1973 oil crisis. The Strait of Hormuz—a critical waterway carrying approximately 20% of the world's daily crude oil and liquefied natural gas—nearly ground to a halt. Brent crude surged from under $80 per barrel to a peak of $138 in the weeks following the outbreak of conflict, before gradually retreating on expectations of peace talks. However, as of May 26, 2026, prices continue to oscillate at high levels between $97 and $105 per barrel.

The impact of this geopolitical storm has long transcended the Middle East region itself. Global inflation is rising once again, with sharp increases in gas prices at pumps across multiple countries, and soaring costs for energy-intensive industries such as aviation, chemicals, and shipping. Simultaneously, this crisis has presented unprecedented market opportunities for commodity traders and digital asset investors.

Key Takeaways

The virtual blockade of the Strait of Hormuz has cut off approximately 14 million barrels per day of crude oil supply, more than three times the scale of the 1973 Arab oil embargo.

Brent crude peaked at $138/barrel and is currently (May 2026) consolidating in the $97–$105/barrel range.

The latest EIA forecast puts the average Brent price for 2026 at around $96/barrel, declining to $89 in the second half of the year as the Strait of Hormuz gradually reopens.

Goldman Sachs has lowered its Q2 Brent forecast to $90/barrel, maintaining $82 for Q3 and $80 for Q4.

The head of ADNOC has explicitly stated that even if the conflict ends immediately, a full resumption of transit through the Strait of Hormuz is unlikely before Q1 or Q2 2027.

Oil price trajectory is highly dependent on diplomatic progress, with each round of peace talk signals triggering significant price volatility.

1. Why is This Conflict So Unique?

Historically, turmoil in the Middle East has frequently impacted oil prices, but the intensity of this disruption far exceeds past events. According to data from the International Energy Agency (IEA) Oil Market Report for April, global oil supply plummeted by 10.1 million barrels per day (b/d) in March 2026, falling to 97 million b/d, marking the largest single-month decline in modern history.

The root cause: Historically, the Strait of Hormuz facilitated the passage of approximately 20 million b/d of oil, covering major exports from Saudi Arabia, Iraq, the UAE, and Kuwait. According to assessments from ICIS analysts, the conflict has resulted in a loss of about 14 million b/d of Middle Eastern oil production, a gap that no overland alternative routes can fill.

For comparison, the 1973 Arab oil embargo, which removed only about 4 to 5 million b/d from the market, caused a quadrupling of oil prices and triggered recessions in multiple countries. The current shock is three times larger in absolute scale, while modern economies remain significantly energy-dependent.

2. Price Timeline: From Outbreak to Present

Early March 2026 (Conflict Eruption): Following the US-Israeli strikes on Iran, WTI futures surged 24.6% in a single day to $113, with Brent climbing to around $114. According to a report by Fortune magazine, Dow Jones futures crashed over 1,000 points on the same day.

Peak Phase (March to April): As the situation escalated further, IEA data shows Brent spot prices hit a historical high of $138 per barrel on April 7, with an average price of $117/barrel for the entire month of April. Asian market middle distillate prices briefly exceeded $290/barrel during this period, setting a new record.

Decline Phase (April to May): The signing of a two-week ceasefire agreement provided a noticeable breather for the market. An investigative report by CBS News noted that the average US retail gasoline price briefly rose to $4.06 per gallon, a peak for recent years, but retreated slightly from the highs as diplomatic contacts were initiated.

Current Situation (Late May): Brent is quoting in the range of approximately $103 to $105 per barrel. US Secretary of State Marco Rubio publicly stated that there is a "fairly solid framework" on the negotiating table. The Washington Times reports that oil prices briefly fell to $97.90 on Monday, the first time breaching the $100 mark in nearly a month.

3. Diplomatic Progress ≠ Supply Normalization: The Most Easily Overlooked Detail

Many market participants equate "ceasefire" with "lower oil prices." This is a dangerous misjudgment.

According to public statements by the head of ADNOC, even if the conflict ends immediately, the most optimistic timeline for the Strait of Hormuz to return to pre-war transit levels is Q1 or Q2 2027. The reason is that normalizing the strait is a phased physical process: upstream oil wells require safety checks before restarting, port infrastructure needs assessment and repair, tanker operators need to re-evaluate voyage risk premiums, and both buyers and sellers need to rebuild supply chains.

ICIS analyst Kojo Orgle further pointed out that even with a rapid physical reopening of the strait, the actual tightness in the oil market supply is expected to persist for at least three months or longer after any agreement is reached. This suggests limited downside room for oil prices even after a peace deal is finalized.

4. Comparison of Latest Major Institutional Forecasts

There is significant divergence in forecasts for the 2026 annual average Brent price among various institutions, with the core variable consistently pointing to the timeline for reopening the Strait of Hormuz:

EIA: The May Short-Term Energy Outlook forecasts an average Brent price of approximately $106/barrel for May-June. It predicts the Q4 average will fall to $89 and the full-year average to approximately $96, as Middle Eastern production gradually recovers in the second half of the year.

Goldman Sachs: In a research report covered by Bloomberg, Goldman Sachs raised its 2026 full-year Brent average forecast to $85, characterizing the shock as the "largest supply shock ever." Subsequently, with the emergence of ceasefire signals, Goldman lowered its Q2 forecast to $90 and its Q4 baseline expectation to $80, maintaining its Q3 forecast of $82.

Morgan Stanley: Its Q2 Brent forecast stands as high as $110/barrel, the most hawkish among major institutions, believing supply recovery will be much slower than the market anticipates.

Macquarie Group: According to analysis by Seeking Alpha, Macquarie estimates that if the conflict extends to the end of Q2 and the Strait of Hormuz remains closed, oil prices could climb to an extreme scenario of $200/barrel.

BMI (Fitch Solutions): Has raised its 2026 Brent average price forecast by $8.5/barrel.

J.P. Morgan: In pre-war forecasts, J.P. Morgan anticipated a 2026 average Brent price of around $60. However, this assessment was made before the conflict erupted and its current reference value has significantly diminished.

5. Three Scenario Analysis: Where Could Oil Prices Go?

Scenario 1: Peace Deal Reached, Strait of Hormuz Gradually Reopening (Base Case)

This is the primary direction currently priced into the market. If the US and Iran reach a phased agreement before June, Brent could gradually retreat from the current $100+ level to the $80-$90 range in H2 2026, potentially approaching the EIA's forecast of around $70 by year-end. However, as previously noted, full supply normalization will still take several quarters.

Scenario 2: Talks Collapse, Conflict Continues (Stress Case)

If diplomatic processes stall again and the Strait of Hormuz blockade persists, oil prices could retest $120+. Macquarie's extreme scenario of $200 would no longer be just a theoretical figure. EY-Parthenon senior economist Lydia Boussour stated in an interview with CBS News that even if the conflict ends, the "lag effects" on supply chains will persist throughout 2026.

Scenario 3: Surprise OPEC+ Production Increase Eases Pressure (Relief Case)

OPEC+ continues to signal potential production increases. However, as analysis by Discovery Alert points out, several core OPEC+ member states are themselves affected by the conflict. Increases in nominal quotas do not equate to actual increases in delivered supply. Nonetheless, record-high production from non-OPEC producers like the US and Brazil represents one of the true variables that could ease prices.

6. How Oil Price Turmoil Impacts Cryptocurrency and Investor Strategies

The violent swings in crude oil prices are not just a topic for traditional energy investors.

Inflation and Macro Linkages: Every $10/barrel increase in oil prices typically pushes global CPI up by approximately 0.3 to 0.5 percentage points. With oil prices still above $100, expectations for Federal Reserve rate cuts will likely remain suppressed, creating a macro headwind for risk assets, including cryptocurrencies.

Risk Aversion and Capital Flow: During periods of escalating conflict, capital tends to flow towards gold and the US dollar. However, historical data shows that in certain regions (e.g., economies facing currency devaluation in Iran or increased sanctions), on-chain transaction volumes for BTC and USDT often rise in tandem, serving as tools for alternative store of value and cross-border remittance.

Commodity Trading Opportunities: For investors seeking to capture trading opportunities amid oil price volatility, MEXC offers a range of diversified trading products, including crude oil-related contracts. Coupled with deep liquidity for trading pairs and leverage options up to 200x, it provides flexible tools for professional traders.

7. Exclusive Insights from the MEXC Crypto Pulse Research Team

The core logic of the current oil market lies in a timing discrepancy that the market generally underestimates: the diplomatic timeline and the supply recovery timeline are two fundamentally different curves. Each time the market reacts swiftly to ceasefire news, it implicitly makes the erroneous assumption that the oil price risk will dissipate the day an agreement is signed.

We believe that crude oil trading in the second half of 2026 will exhibit a special pattern: the overall price range will shift lower (retreating from above $110 to the $80-$90 range), but volatility will not narrow correspondingly. Each round of progress in talks or breakdown in negotiations will trigger daily swings of several dollars or even over ten dollars. This "low-price, high-volatility" environment is a trap for trend-following investors but represents a window of opportunity for short-term traders who can precisely pinpoint event-driven nodes.

Another aspect worth watching is that high oil prices are systematically improving the economics of drilling in non-OPEC US regions, particularly the Permian Basin. US crude oil production could hit new highs in H2 2026. If Middle Eastern supply gradually recovers in 2027, the market will then face dual incremental pressure from high US output and resurgent Middle Eastern production. The subsequent price adjustment could be far more significant than current expectations.

FAQ

Q: How significant is the impact of the Strait of Hormuz closure on global oil prices?

A: The Strait of Hormuz is the world's most critical crude oil transport waterway. In normal times, approximately 20 million barrels of crude oil and LNG pass through daily, accounting for about 20% of global energy supply. This conflict has caused a supply disruption of roughly 14 million b/d, directly propelling Brent crude prices from below $80 to a peak of $138, making it the largest single supply shock in modern oil market history.

Q: Will current oil prices continue to rise?

A: This is highly dependent on the progress of peace talks. In the base case scenario, with the Strait of Hormuz gradually reopening in the second half of the year, Brent could retreat from its current ~$100 level to the $80-$90 range. However, if negotiations fail, an extreme scenario cannot be ruled out, potentially testing levels above $120 or even higher. There is significant divergence among institutional forecasts, necessitating continuous monitoring of diplomatic developments.

Q: Can OPEC+ production increases alleviate the supply shortage?

A: Theoretically, yes, but the actual effect is limited. Several core OPEC+ producing nations are themselves affected by the conflict, meaning nominal production quota increases cannot be immediately translated into actual deliveries. Production growth from non-OPEC regions like the US and Brazil offers more tangible relief, but the scale is still insufficient to fill the ~14 million b/d supply gap from the Middle East.

Q: How will the Iran conflict impact the cryptocurrency market?

A: The indirect impact is primarily transmitted through two pathways. First, the macro pathway: high oil prices fuel inflation, suppressing expectations for central bank rate cuts and creating general pressure on risk assets. Second, the demand pathway: in economies under sanctions or significant domestic currency depreciation pressure, usage of BTC and USDT as alternative financial tools typically increases, a pattern validated multiple times by historical data.

Q: How can average investors participate in oil-related trading?

A: Investors can gain exposure to oil markets through various channels, including crude oil futures, ETFs, and by trading oil-related contracts or digital assets linked to energy prices on platforms like MEXC. Please note that commodity trading carries high risk. It is recommended to fully understand the risks of leverage before operating with caution.

Q: What is a reasonable price range expectation for oil in 2026?

A: Based on the midpoint of the latest institutional forecasts, the full-year average price for Brent crude in 2026 could be in the range of $80 to $96 per barrel. This is higher than the pre-conflict level of $60 to $65 but lower than the peak crisis levels. Uncertainty remains extremely high, with the main variable being the actual timeline for the Strait of Hormuz reopening and the outcome of US-Iran negotiations.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or a recommendation of any financial product. Trading in crude oil and related assets involves high market risk. Prices can fluctuate violently due to unforeseen factors such as geopolitical events and policy changes. Readers should fully assess their own risk tolerance and consult with professional financial advisors before making any investment decisions. Past performance is not indicative of future results.