Global energy markets are nearing the end of the biggest oil supply disruption in history, which has halted production of more than 14 million barrels per day (bpd) from the Middle East as a result of the three-month war between Washington and Tehran.

As the official signing of the peace and truce agreement between Iran and the United States approaches next Friday in Geneva, crude oil prices fell to their lowest levels in three months, driven by the start of a reroute of oil tankers to the Persian Gulf.

This détente on the ground comes in conjunction with the release of the International Energy Agency's monthly report, which expects a record jump in supply and the resumption of strategic reserve construction, at a time when the financial community is waiting for the reflection of the fall in fuel prices on the Federal Reserve's interest rate decisions.

Sharp decline in prices and Brent stabilizes near $79

Crude oil prices continued their sharp decline to record their lowest level in three months, today, Wednesday, June 17, amid growing expectations from producers and traders that the expected US-Iran agreement to reopen the Strait of Hormuz will lead to huge financial and oil flows that will ease supply shortages in the global crude market.

Brent benchmark crude (August settlement) settled near $79.05 per barrel, after falling 1.1% in early trading, while US West Texas Intermediate crude (July delivery) traded near $76.18 per barrel ($75-76 according to parallel market data).

Logistics trade showed signs of a breakthrough, with ship-tracking data showing tanker owners rerouting their vessels ahead of the potential opening of the waterway, with two tankers bound for Africa changing course in the Indian Ocean towards the Middle East.

The easing of supply scarcity was reflected in the shrinking of the spread between the two nearest Brent contracts to just 14 cents per barrel in the event of a marked decline in the backwardment premium, after peaking at $9.65 in early April due to geopolitical concerns.

Experts and analysts, including Parash Jain of HSBC Holdings and Dennis Kessler of BOK Financial Securities, said a full recovery and traffic would be gradual as demining vessels and U.S. naval operations would need to accompany ships during the first weeks to ensure stable supply chains and avoid having to reroute ships again.

U.S. Gasoline Declines and Fed Meeting

Continued decline in crude prices has helped lower the prices of derivatives and refined materials, easing inflationary pressures on consumers: In the United States, the national average price of gasoline has fallen to around $4 per gallon, down from a record peak of more than $4.56 last May, according to data from the Association of American Automobile Manufacturers.

The decline in energy costs will be a prominent element in the calculations of the Federal Reserve, whose monetary policymakers are meeting on Wednesday to discuss interest rates, amid widespread expectations that current borrowing costs will remain unchanged at this meeting pending market stability.

International Energy: 2027 Projections and Record Stockpiles

The International Energy Agency (IEA) released its monthly oil market report on Wednesday, expecting a gradual recovery for the global market from the effects of the Strait of Hormuz closure before the market balance turns into a huge oversupply by 2027.

In its first target forecast for 2027, the IEA indicated that global oil supply will rise by about 8 million barrels per day, while demand will grow by only two million barrels per day, giving countries an opportunity to replenish depleted reservoirs and build new strategic reserves to review their energy policies in response to the latest crisis.

The Agency's statistical and estimated data reflect the following:

Supply size for 2026: Global oil supply is expected to decline by 3.9 million barrels per day year-on-year in 2026 to reach 102.4 million barrels per day as a result of the fallout from the war.

2027 jump: Supply is expected to bounce back and rise to 110.3 million barrels per day next year as Iranian exports and Persian Gulf flows resume fully.

Erosion of inventories: Despite the current price declines, global crude oil inventories are still eroding and depleting at a record pace and could reach historic lows this year before the verse reverses, the agency warned, in line with estimates by a U.S. industrial institute that noted that U.S. inventories fell by 8.3 million barrels last week, particularly at the main storage center in Cushing, Oklahoma.