As Hormuz opens, oil markets are awash in supply

The oil market is coming full circle as millions of barrels that were stranded in the Persian Gulf head to global markets, creating a sudden oversupply that has pushed prices to their lowest level since the US-Iran war began.

Morgan Stanley analysts said in a note to clients that they counted 35 oil tankers exiting the Strait of Hormuz on Thursday, close to the typical daily average seen before the war. “Yet the ‘twin solvers’ of high US exports and low Chinese imports remain in place,” raising the risk of a return to structural oversupply. To balance the market next year, flows through the strait need only recover to 65% of their pre-conflict level.

With the market suddenly awash with oil, price estimates are being pared across the board. Goldman Sachs lowered its Brent crude forecasts, cutting its fourth-quarter 2026 and its 2027 average. Morgan Stanley sees prices going even lower. “Strip away the narrative for a moment and read only the prices,” the latter wrote. “They describe a market that has weakened across the board.”