Brent plunged 4.3% to pre-war lows as Hormuz supply flood flips market into contango

Crude prices collapsed on Wednesday, erasing all remaining war premiums to settle at their lowest levels since before the conflict.

The international Brent contract plunged $3.34 (4.3%) to $73.74 a barrel, while US WTI dropped $2.87 (3.9%) to $70.34.

During the session, Brent hit an intraday low of $73.12—its weakest since February 27, the day before U.S.-Israeli strikes on Iran—while U.S. crude futures breached the $70-a-barrel mark intraday for the first time since March 2.

The sell-off was driven by a rapid clearing of the Strait of Hormuz—assisted by military escorts, approximately 20 million barrels exited the waterway in a single 24-hour period. To facilitate this massive outflow and avoid remaining Iranian sea mines, Oman successfully established two temporary, toll-free shipping lanes.

This sudden release of stranded Gulf crude and newly authorised Iranian barrels has fundamentally altered the market structure. For the first time since the war began, the market has flipped into contango—meaning prices for prompt delivery are now cheaper than second-month futures.

This shift confirms a near-term physical oversupply, forcing sellers to offer discounted cargoes globally to secure buyers. Anticipating this softer demand environment, J.P. Morgan officially downgraded its second-half 2026 Brent forecast, projecting an average of $86 in the third quarter and $80 by year-end.

Despite the heavy downward pressure, tight fundamentals elsewhere are preventing a total market collapse. Total US crude stocks, combining commercial inventories and the Strategic Petroleum Reserve, plummeted by 15.1 million barrels last week to 743.3 million, marking the lowest supply level since 1984.

Global product markets also face localized shortages, with confirmation that a major Moscow refinery will remain offline for at least six months following Ukrainian drone strikes. Furthermore, the underlying US-Iran peace accord remains fragile, with both sides publicly contradicting each other regarding future nuclear inspection terms.

Written by: Aiman Haikal