75% of Oil Previously Flowing Through Strait of Hormuz Expected to Return to Market by Year-End
According to energy expert Fereidun Fesharaki, Honorary Chairman of FGE NexantECA, up to 75% of the oil that previously flowed through the Strait of Hormuz is expected to return to the market by the end of this year. However, he does not guarantee that oil prices will decrease significantly in 2027 due to the fact that tensions between the US and Iran are unlikely to be resolved in the near future.
Oil Price Forecasts: A Complex Scenario
Before the Iran conflict erupted, FGE NexantECA consulting firm had forecast oil prices to remain high at $50-$60 per barrel for the next year. According to Fesharaki, this scenario could still materialize in 2027, but it depends on the assumption that a sustainable peace will be achieved.
However, Fesharaki personally believes it is "hard to imagine" a scenario where the US and Iran reach a sustainable peace agreement.
"There will be more conflicts, there will be more troubles, this is not the end of the story. This is just the beginning of the story," Fesharaki told CNBC.
China's Role in the Oil Market
In the short term, China is likely to continue as Iran's top oil customer despite Tehran also seeking to sell oil to other buyers in Asia.
Currently, China is waiting for the right moment and has not yet returned to large oil shipments from Iran or elsewhere. This lack of interest from China is "keeping the market in a waiting state," Fesharaki noted.
Forecasts from Investment Banks
Other analysts expect flows through the Strait of Hormuz to return to normal in the coming months, leading to a significant surplus next year, which would put downward pressure on oil prices.
For example, Citigroup forecasts Brent crude could fall to as low as $60 per barrel by the end of this year.
"We expect the MOU will be maintained and become a deal in the coming months as the downgrade engines overcome the alternatives for the US, Iran and most of the Middle East region," Citigroup analysts said in a report last week.
Other Wall Street banks have also begun forecasting surpluses after the US and Iran signed a Memorandum of Understanding (MOU).
For instance, Morgan Stanley has cut its oil price forecast for the next 18 months as they expect the reopening of the Strait of Hormuz to accelerate the new supply surplus.
Comparison of Oil Price Forecasts from Different Sources
| Source | Oil Price Forecast (USD/barrel) | Forecast Period | Main Influencing Factors |
|---|---|---|---|
| FGE NexantECA | $50-$60 | 2027 | Sustainable peace between US and Iran |
| Citigroup | $60 | End of 2024 | MOU becoming an official agreement |
| Morgan Stanley | Not specifically disclosed | Next 18 months | Supply surplus from Hormuz reopening |
Impact on the Global Energy Market
The situation in the Strait of Hormuz continues to be a key factor shaping the global energy market. With 75% of oil expected to return to the market, the industry will face new challenges in supply-demand balance.
Energy technology companies are also closely monitoring this situation, as the stability of the Middle East region directly impacts investment decisions in renewable energy and energy-saving technologies.
Despite medium-term forecasts of declining oil prices, expert Fesharaki emphasized that geopolitical tensions will continue to be an unavoidable factor in long-term energy strategies.