Oil Prices Crash to Four-Month Lows: How the Strait of Hormuz Reopening, US-Iran Ceasefire, and Saudi Export Surge Ended the War Premium

By early July 2026, the war premium that had inflated oil prices for months had all but vanished. Brent crude settled near $70.33 per barrel, and WTI crude fell to about $67.20—four-month lows not seen since before the Iran conflict erupted in late February . The selloff reflected a market rapidly repricing supply risks as a cascade of positive developments took hold: the reopening of the Strait of Hormuz, a fragile U.S.-Iran ceasefire, and the return of Saudi exports from the giant Ras Tanura terminal.

Hormuz flows surge past 10 million barrels per day

The single most important factor driving prices lower was the rapid recovery of crude shipments through the Strait of Hormuz. Commercial shipping through the critical waterway surged in late June and early July, with a U.S. official reporting that oil flows had risen to more than 10 million barrels per day . Reuters independently confirmed that crude shipments through Hormuz had climbed to their highest level since the Iran war began after a ceasefire deal reopened the waterway .

That recovery directly reduced the immediate fear that Iran could keep a major global oil chokepoint disrupted. The Strait of Hormuz normally handles about 20 million barrels per day of petroleum liquids, or roughly 20% of global seaborne oil trade . During the conflict, flows had plunged by nearly 30% in the first quarter of 2026 alone . The rebound to 10 million bpd, while still well below pre-war levels, was enough to convince traders that the worst of the supply crisis was over .

The Islamabad Memorandum: a 60-day ceasefire and diplomatic roadmap

The recovery in Hormuz traffic was made possible by a diplomatic breakthrough. On June 17, 2026, U.S. President Donald Trump and Iranian President Masoud Pezeshkian remotely signed the "Islamabad Memorandum of Understanding" (MoU)—a 14-point framework mediated by Pakistan, Qatar, Saudi Arabia, Turkey, and Egypt . The agreement extended a fragile ceasefire for 60 days, reopened the Strait of Hormuz toll-free with a 30-day deadline for Iran to clear mines, lifted the U.S. naval blockade, and provided sanctions waivers for Iranian oil exports .

Following the signing, the first round of high-level U.S.-Iran talks under the MoU concluded in Bürgenstock, Switzerland, on June 22, with mediators Pakistan and Qatar announcing a roadmap toward a final deal within 60 days . The parties also agreed to establish a "deconfliction cell" with Lebanon to prevent further clashes .

However, the diplomatic process remained fragile. Reuters reported that U.S.-Iran talks faced delays and uncertainty, noting that the ceasefire framework was not yet a durable final settlement . The talks were further complicated by the funeral of Iran's former Supreme Leader Ali Khamenei, which pushed back negotiations . A subsequent flare-up of tit-for-tat strikes on June 29 required both sides to agree to "stand down" again to preserve the interim agreement .

Saudi Arabia resumes Ras Tanura exports and switches to spot pricing

Another major bearish signal came from Saudi Arabia. Saudi Aramco resumed crude loadings from its Ras Tanura terminal—the world's largest oil port—on June 26 after a nearly four-month halt caused by the Strait of Hormuz closure . By July 2, at least five very large crude carriers (VLCCs) carrying a total of about 10 million barrels of Saudi oil had loaded from Ras Tanura and exited the Strait of Hormuz .

To accelerate sales into Asia, Aramco switched to spot pricing for Asian customers, a departure from its usual formula-based official selling prices . That move reinforced the market's perception that more barrels were coming to market quickly. Saudi Arabia's oil exports soon approached pre-war levels, with Bloomberg tracking data showing a surge in shipments . The kingdom also sharply cut its official selling prices for July—by $6 per barrel for Arab Light crude to Asia—on the back of slow demand and the expectation of rising supply .

Other bearish factors: reserve releases and demand weakness

Beyond the Hormuz recovery and the ceasefire, additional supply-side pressure came from emergency strategic reserve releases. Several countries had been pouring oil out of strategic reserves to compensate for the loss of Hormuz flows, adding to the near-term surplus . On the demand side, U.S. gasoline demand softened: the Energy Information Administration reported that motor gasoline supplied fell to 8.8 million barrels per day for the week ending June 20, down 3.2% week-over-week and 4.5% below the same week in 2025 .

The specific claim that OPEC+ was expected to hike production by about 188,000 barrels per day for August is not supported by the sources provided. This figure cannot be independently verified and should not be relied upon. However, the broader bearish supply backdrop is well-documented through the recovery in Hormuz flows and renewed Saudi exports .

Remaining risks and market outlook

While the market has clearly priced in a normalization scenario, several risks could reverse the price slide:

• Diplomatic fragility. The U.S.-Iran talks have faced delays and uncertainty, with the ceasefire framework dependent on continued negotiation. A breakdown in talks could quickly reinstate a risk premium .
• Hormuz disruption risk. The Strait of Hormuz is a major global oil transit chokepoint; any renewed military incident or re-imposition of a blockade could sharply reduce flows . Oil prices actually fell even after a vessel was hit near Oman on June 26, suggesting traders were focused on the recovery story rather than residual security risks—but that could change rapidly .
• Saudi export surge. If Ras Tanura loadings continue at the current pace and Aramco keeps accelerating spot sales into Asia, additional near-term supply could keep downward pressure on prices .
• Incomplete recovery. Despite the surge, daily vessel transits through the Strait of Hormuz remained well below the pre-war average of 130–140 ships per day . Goldman Sachs forecast that Gulf exports would return to pre-conflict levels only by the end of July, with full production recovery by October . Morgan Stanley warned that 25% of lost supply might not return until well into 2027 .

Bottom line: The oil market has stripped out much of the conflict premium that built up over four months of war. Hormuz flows have rebounded, a diplomatic framework is in place, and Saudi exports are returning. But the process remains fragile, and the risks are not extinguished—they are merely deferred. A breakdown in talks or a new military incident could quickly bring the war premium back.