Oil prices have fallen to levels not seen since before the war in Iran started, offering relief to households, businesses and governments around the world.
This week’s drop in the price of Brent crude, the international benchmark, which hovered between $72 and $73 per barrel. barrel Friday, is also a significant psychological milestone. As the fighting flared up, the commodity served as a real-time barometer of the war’s toll on the global economy.
Oil prices had risen as high as $118 per barrel. barrel in the early stages of the war after Iran effectively blocked ships from passing through the Strait of Hormuz, a vital shipping route for crude oil. But they began to decline after efforts to negotiate a ceasefire and evacuate ships trapped in the Persian Gulf. American and Iranian officials agreed in mid-June to reopen the strait, through which about 20 percent of the global supply of oil flows.
Traffic through the strait has increased significantly in recent days. Since the US lifted its naval blockade last week, more than 330 vessels have passed through the strait, according to Kpler, a global maritime data firm. Only a handful of ships braved the passage each day during the height of the conflict, but recent increases in traffic have been at most about half the typical daily volumes before the war.
Iran’s military rammed a container ship in the strait on Thursday, shaking markets. It was the latest setback for shipowners, who remain wary of operating in the gulf after periodic demands from Iran to follow its preferred route and possibly pay fees for passage. President Trump has insisted there would be no tolls, insurance costs or taxes for ships sailing through the strait.
On Friday, Iran’s Foreign Ministry reiterated that “safe passage through the Strait of Hormuz is not guaranteed” for ships that do not first seek permission from Tehran to navigate the waterway.
That didn’t seem to deter investors: Oil is set to record a sixth straight weekly decline, although the decline has often been choppy. Over the past 24 hours, prices have briefly dipped below levels not seen since February 27, the eve of the Iran war, when Brent crude fell to $72.48 a barrel. barrel.
It would take something “much more meaningful” than an isolated ship attack to send oil prices rising again for an extended period, said Allen Good, director of equity research at research firm Morningstar.
“The market continues to see through these flare-ups as it perceives Trump and the Iranians as ultimately committed to a short-term deal and the opening of the Straits,” Mr. Good. At the same time, a large amount of oil coming through the strait is ready to hit the market at once, putting downward pressure on prices.
Still, the economic effects of energy shocks tend to linger, said Ken Wattret, vice president of global economics at S&P Global Market Intelligence. He warned that it could take months for central banks to rein in inflation caused by the shock. “We should not conclude that just because crude oil prices are back where they were at the end of February, the impact on the global economy is over,” he said.
Lower oil prices may take time to trickle down to consumers. U.S. gasoline prices, which tend to lag changes in oil prices, fell to $3.90 a barrel. gallon Friday, according to the AAA motor club, still about 30 percent above where they stood before the war started.
“We’re unlikely to see much lower prices at the pump immediately,” said Brett House, a professor of economics at Columbia Business School. The United States, he added, is entering its peak summer driving season at a time when the government’s oil reserves have been depleted by the war.
Persian Gulf countries are now exporting nearly 15 million barrels of oil a day, up from less than 10 million barrels a day in May, analysts at the International Energy Agency, a multilateral organization in Paris, said in a report this week. They attributed most of this increase to increased shipping through the strait. (The Gulf countries exported nearly 25 million barrels of oil per day before the war, most of it through the strait.)
The increase in oil supply comes at a time when global demand is expected to fall by nearly five million barrels per day in the second quarter of 2026, in part because consumers cut their energy use during the conflict, the IEA said.
“Prices have since fallen significantly as demand has fallen sharply and on increased optimism that a deal would be struck to enable more regular ship flows through the strait,” the analysts wrote.
The agency is among those warning that a recovery in oil production could create a glut next year that will make oil even cheaper. JPMorgan Chase analysts recently said they expected the price per barrel to fall to the low $60s in the second half of 2027.
