After three months of energy chaos, peace talks between the United States and Iran are finally gaining traction. Brent crude, which peaked at nearly $120 a barrel in early March, has already slipped back below $100 on signs of a potential deal. But the real question haunting energy markets isn't whether prices will fall — it's how far, and how fast.
The War Premium Is Enormous
To understand what peace could mean for oil, consider what war has already done. Prices surged more than 55% since the start of the conflict, with Brent crude jumping from around $72 a barrel in late February to nearly $120 at its peak, as fears mounted over supply disruptions through the Strait of Hormuz. Attacks on energy infrastructure and shipping disruptions in the strait, which handles about 35% of global seaborne crude oil trade, triggered the largest oil supply shock on record, with an initial reduction in global oil supply of about 10 million barrels per day.
That means there is a massive war premium baked into every barrel — and markets have already started unwinding it. Crude oil prices dropped about $5 per barrel in the first major trading session following the emergence of rough and tentative outlines of a deal to end the U.S.-Iran conflict, with Brent futures trading around $98.76 — a drop of over 4.6% from the prior close.
The Immediate Drop: $10 to $20
Analysts are broadly in agreement that a confirmed peace deal and the reopening of the Strait of Hormuz would trigger a sharp, immediate selloff. Commodity Context founder Rory Johnston said that any reopening of the strait would likely trigger an immediate drop of between $10 and $20 in crude prices due to speculative positioning. That would push Brent into the low-to-mid $80s from today's levels — significant relief, but not a return to the pre-war world.
The Floor: $80 to $90, Not $65
Once the initial shock fades, where does oil settle? Most analysts point to a floor well above pre-war levels. Supply chain bottlenecks, infrastructure damage, and lingering production outages would keep the market tight, likely anchoring Brent in the $80 to $90 range rather than a full return to pre-crisis levels.
That view is echoed by Wall Street. Peter Boockvar, chief investment officer at Bleakley Financial Group, argued that oil prices would not return to $65 per barrel even if the conflict ended immediately. The World Bank forecasts Brent to average $86 a barrel for full-year 2026, assuming the most acute disruptions end in May and that shipping through the Strait of Hormuz gradually returns to pre-war levels by late 2026.
Why a Full Recovery Could Take Years
Even the most optimistic scenarios assume a slow normalization. Even if an agreement that opens the Strait is reached, energy markets are expected to remain disrupted for months. Goldman Sachs made a structural argument that even after the Strait reopens, prices are not expected to fall quickly back to pre-war levels — the shock has forced markets to reprice the concentration of oil production in the Persian Gulf, and that risk premium is now baked into long-dated oil forwards, not just near-term contracts.
Bank of America had previously forecast Brent averaging $80 per barrel in the second quarter of 2026, but only returning to $65 in 2027 as the pre-war surplus re-emerges. That timeline assumes infrastructure repairs go smoothly, Iranian production restarts without major hitches, and geopolitical trust is rebuilt — none of which is guaranteed.
The Market Has Heard This Before
One important caveat: after repeated false starts over the past three months, the market has begun to largely ignore Trump's peace announcements, instead waiting for tangible signs of an agreement. Traders have been burned before. Every ceasefire rumor has produced a price drop, only for hostilities or complications to push prices back up days later.
Today, signs of an accord sent benchmark oil prices to their lowest levels in more than a month, offering potential relief from sustained high inflation — but the market is pricing in caution, not celebration.
The Bottom Line
If a genuine, lasting peace deal is signed and the Strait of Hormuz fully reopens, expect Brent crude to fall sharply — likely toward the $80–$85 range in the near term, with a possible dip into the mid-$70s if the recovery is faster than expected. A return to the $65–$70 range that defined markets before the war looks unlikely for at least another year, and perhaps longer. The war may end. The damage to global energy markets will not heal overnight.
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