The recent dip in oil prices follows the U.S.-Iran agreement to negotiate a framework for reopening the Strait of Hormuz. Investment banks and speculators have largely turned bearish, banking on a return to market surpluses by 2027. This confidence assumes the June memorandum of understanding will evolve into a binding peace deal by August. However, public progress remains invisible, and Iran continues to signal its intent to maintain control over the passage, including demands for service fees.

Market resilience during the initial supply shock was not a sign of fundamental health, but the result of aggressive inventory depletion. Governments drained strategic reserves to record lows, and China utilized its 1.3 billion-barrel stockpile to bypass the spot market. Outside of China, the world currently lacks the buffers necessary to absorb another disruption. Analysts at Energy Aspects warn that the market is dangerously exposed, as U.S. crude inventories sit at levels not seen since 1985. Even if Chinese import demand remains muted in the near term, the eventual race to rebuild global stocks against a backdrop of geopolitical volatility ensures that any breakdown in negotiations will trigger an immediate, sharp price spike.