Why oil could fall sharply if the war ends
1. War premium can disappear very quickly
A significant portion of today’s price reflects geopolitical risk—particularly the possibility of disruption around the Strait of Hormuz. If there is a credible ceasefire/peace agreement, traders can rapidly remove that risk premium.
2. Actual crude exports are already recovering
This is probably the strongest argument supporting your view. Middle Eastern crude exports through/around the Strait reportedly reached about 16.5 million barrels/day in September, close to pre-war levels, compared with only around 6 million b/d in March. Producers have increasingly used pipelines, alternative routes and ship-to-ship transfers.
3. The market may suddenly move from “shortage” to “oversupply” psychology
During the war, millions of barrels/day were temporarily shut in. If the conflict ends and those barrels return while inventories are still rebuilding, the market can quickly reprice the marginal barrel.
4. OPEC+ becomes an important variable
OPEC+ kept October production policy unchanged, with another meeting scheduled for 4 October.
If geopolitical risk falls, producers face a different dilemma: whether to bring more production back into a market that may already be adequately supplied. That could amplify downward pressure.
5. Demand could weaken at high oil prices
Prolonged high energy prices can hurt airlines, shipping, manufacturing and consumers. At the same time, Middle East tourism has suffered materially from the conflict. Tourism Economics estimates Middle East inbound arrivals could fall 11–27% year-on-year in 2026, depending on how long the conflict lasts.
The EIA’s September forecast still expected Brent to average around $90/bbl in 2H 2026, with prices remaining elevated because inventories have been depleted. It expected a gradual decline toward roughly $74/bbl in 2027 as production recovers and inventories rebuild.
So the key question isn’t simply:
“Will the war end?”
“If the war ends, how quickly do the shut-in barrels return, how quickly do inventories rebuild, and how much additional oil does OPEC+ allow into the market?”
A potential bearish sequence
If the thesis plays out, I would watch this sequence:
Ceasefire/peace negotiations → Hormuz shipping normalises → insurance/freight costs fall → Middle East production resumes → inventories stop falling → OPEC+ increases supply → geopolitical premium disappears → Brent falls.
Brent Hits $102 As US-Iran Tensions Boil Over, Again
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
