Crude Oil Posts Largest Q2 Decline in Six Years
Miles Bennett
Brent crude fell 38% this quarter — the steepest since Q1 2020 — after a U.S.–Iran ceasefire collapsed the supply-disruption premium and prices snapped back to pre-conflict levels.
How far have prices fallen?
Brent August contract traded at $73.05 a barrel, down 38% for the quarter; June alone saw a near-21% decline.
WTI (West Texas Intermediate, the U.S. benchmark) stood at $69.98, down roughly 30% for the quarter.
Both benchmarks posted their largest quarterly drops since Q1 2020 — the last time losses were this steep was during the initial Covid lockdowns.
What triggered the sell-off?
The direct catalyst: a U.S.–Iran ceasefire landed in June. Ship transits through the Strait of Hormuz — the chokepoint for roughly a fifth of global seaborne oil — rebounded, and the supply-disruption premium evaporated.
FxPro chief analyst Alex Kuptsikevich noted prices fell faster than expected because Persian Gulf states moved quickly to open alternative shipping routes, partially covering European and Asian demand for the months ahead.
This means → the "war premium" baked into oil was almost entirely stripped out in one move; the speed of the reversal shows that premium was far larger than most had assumed.
How was the supply gap filled?
Marex analyst Edward Meir told MarketWatch the market had done "a remarkable job" bridging the Iranian disruption — China sharply cut crude imports, countries drew on strategic reserves, and demand destruction across Asia (flight cancellations, energy rationing, higher import tariffs) offset part of the shortfall.
In plain terms = supply shrank, but demand was hammered down too; the two effects offset each other, making the gap smaller than feared.
Meir summed up the logic: "Whenever there's a supply bottleneck, markets find a workaround."
What new supply is still coming?
The U.S., Venezuela, and Iraq (via Turkey) have all expanded output; Saudi pipeline throughput hit a record high.
The UAE and Oman are planning to expand pipelines running beneath the Strait of Hormuz, aiming to bypass the chokepoint entirely.
This means → even if the strait flares up again, Gulf producers are building an "insurance corridor" — and the market's ability to price in strait risk is being diluted.
Where do prices go from here?
Morgan Stanley has cut its Q4 Brent forecast from $80 to $75 a barrel.
Kuptsikevich sees a "rather bleak" long-term outlook for Brent if conflict does not re-escalate — Middle East output recovery plus the lifting of U.S. sanctions could push Iranian production to 3.3 million barrels per day by year-end.
Meir flagged two variables that could support prices: countries needing to replenish depleted strategic reserves, and a renewed escalation in the Middle East — both will be the key swing factors for the second half of the year.
Content is for reference only, not financial advice.