Oil Markets Face Surprise Surplus as Iran Conflict Eases

Oil markets are facing an unexpected problem: oversupply. After Brent crude plummeted to around $87 per barrel, following a 7% drop in recent sessions, analysts say the market is staring at a surplus.

The Strait of Hormuz closure earlier this year had knocked off an estimated 11-14 million barrels per day from global supply, roughly 14-20% of global oil trade. But with diplomatic efforts gaining traction and military strikes paused, the focus has shifted to managing excess supplies.

The US Energy Information Administration projects inventory builds of 2.7 million barrels per day in Q4 2026 and a staggering 5.0 million barrels per day in 2027. This would push Brent crude down to an estimated $70 per barrel by the fourth quarter and $65 per barrel next year.