Oil Prices Slide as Banks Cut Forecasts on U.S.-Iran Deal

Oil prices extended their sharp decline Tuesday, with West Texas Intermediate (WTI) crude trading down 2.74% to $77.26 per barrel, according to live market data. The international benchmark Brent crude fell 2.81% to $80.83.

The sell-off follows a preliminary peace deal between the United States and Iran aimed at reopening the Strait of Hormuz, a critical global oil chokepoint, according to related news reports. The agreement, set to be signed Friday in Switzerland, would see Iran reopen the strait within 30 days.

Major investment banks slashed their oil price forecasts in response to the diplomatic breakthrough. According to a report from OilPrice.com, Morgan Stanley cut its third-quarter 2026 Brent forecast to $90 per barrel from $100. Goldman Sachs reduced its fourth-quarter 2026 forecast to $80 per barrel from $90 and lowered its 2027 average forecast to $75 from $80. Citi issued an even more bearish outlook, forecasting Brent at $75 in Q3 2026, falling to $70 in Q4 and averaging $65 for all of 2027.

Analysts cited the potential for a speedy recovery in tanker traffic and higher oil exports once the strait reopens. "Much is still to be negotiated, and key risks remain, but for now, this is a key step towards a de-escalation of the conflict and higher oil exports via the Strait of Hormuz," Morgan Stanley analysts said, according to the report.

For Bakken operators, the price drop is compounded by a regional discount. The Bakken differential was reported at -$3.42 versus WTI on Tuesday, meaning Bakken crude at the wellhead is priced approximately at $73.84 per barrel. The lower realized price directly impacts cash flow and drilling economics for producers across North Dakota's Williston Basin.

In contrast to the crude oil market, natural gas prices saw a modest gain Tuesday, with the commodity trading up $0.03 to $3.18. Separately, the U.S. Energy Information Administration raised its Henry Hub spot price forecasts for 2026 and 2027 in its latest Short-Term Energy Outlook, according to Rigzone.

The swift price adjustment underscores the market's sensitivity to geopolitical supply risks. The Strait of Hormuz has been a focal point of tension, and its anticipated reopening would alleviate one of the major bullish factors supporting oil prices over recent months. Bakken producers, who are largely price-takers in the global market, will be watching for the deal's finalization and the subsequent impact on global inventories and prices.