On June 18, 2026, the international crude oil market extended its nearly two-week decline. WTI crude oil futures fell below $74 per barrel during trading, hitting a three-month low not seen since March 4. Brent crude oil futures dropped in tandem, losing the $77 per barrel mark. As of June 18 (UTC+8), Gate market data showed WTI crude oil futures priced at $73.666 per barrel, with the daily loss widening to 3%. Brent crude oil futures fell 2.60% to $77.173 per barrel. This price range marks a clear departure from the previous long-standing $90–$110 per barrel high, as international oil prices enter a new equilibrium zone between $74 and $80 per barrel.
This round of oil price declines is not driven by a single factor. Instead, it reflects a combination of rapidly fading geopolitical risk premiums and weakening macro demand expectations. The peace agreement reached between the United States and Iran on June 15, along with expectations for the reopening of the Strait of Hormuz and exemptions from Iranian oil sanctions, created a major bearish catalyst on the supply side. Meanwhile, a weakening global economic outlook, hawkish signals from the Federal Reserve, and sluggish refined oil consumption have continued to suppress demand. Under this dual pressure, energy sector ETFs have come under broad pressure, with sustained capital outflows.
Geopolitical Risk Premiums Rapidly Unwind: US-Iran Deal Reshapes Global Oil Supply
The immediate catalyst for this oil price decline was the US-Iran peace agreement. On June 15, US President Trump announced on Truth Social that a deal with Iran had been finalized. On June 17 (Wednesday), the two countries formally signed an interim agreement in France. The core terms include ending the Iran war, reopening the Strait of Hormuz, and granting exemptions from oil sanctions on Iran.
The Strait of Hormuz handles about one-fifth of the world’s oil shipments. Since the conflict began, the closure of this waterway has directly removed millions of barrels of crude oil per day from the market. Under the new agreement, Iran will immediately reopen the Strait of Hormuz, and the US will lift its maritime blockade and oil sanctions. This move effectively strips away the "panic premium" that had been embedded in oil prices due to geopolitical tensions.
Quantitative data on Iranian oil supply underscores the dramatic impact of sanctions and blockades. Since the US began its maritime blockade in April, Iranian crude oil exports have plummeted from around 1.1 million barrels per day in March to just 65,000 barrels per day in May. Production dropped from a pre-war level of about 3.5 million barrels per day to 2.3 million barrels per day in May. With the agreement in effect, Iran is allowed to re-enter the international energy market. Based on pre-war production and current prices, Iran’s annual oil revenue could exceed $60 billion. In the first two months alone after the agreement takes effect, Iran may earn around $8 billion.
On the logistics front, signs of easing are already evident. Tracking data shows that starting this week, at least three tankers carrying over 5 million barrels of crude oil have departed from Chabahar Port, crossing the US Navy’s former blockade line—marking the first such passage since the blockade began in April. A senior US official stated that under the ceasefire agreement, the US will exempt Iranian oil from sanctions, potentially adding several million barrels of supply.
In its monthly market report released Wednesday, the International Energy Agency (IEA) warned that if the agreement is successfully implemented and the Strait of Hormuz reopens, this year’s supply crisis could turn into a severe glut by 2027. The IEA projects that with Middle Eastern oil returning to the market, there will be an oversupply of 5.05 million barrels per day next year. Broader estimates suggest that if the conflict sees a lasting resolution, global crude oil supply could increase by about 8 million barrels per day, while demand is expected to recover at a rate of just 2 million barrels per day.
However, there is still debate in the market about how quickly supply can recover. Oil analysts point out that rebuilding the confidence of shipowners, insurers, and refiners will take time. Factors such as demining, insurance costs, and port congestion could all slow the pace of crude oil flows. The Chief Investment Officer at Karobaar Capital noted, "The market often thinks of reopening as flipping a switch, but in reality, it’s more of a process."
Demand-Side Pressures Mount: From High-Price Suppression to Systemic Economic Weakness
While the geopolitical agreement addresses supply-side issues, the other major pressure on oil prices now comes from persistent demand weakness. The bearish logic around crude oil demand has evolved from the shallow impact of "high prices suppressing end-user consumption" to the deeper effect of "systemic economic slowdown eroding global oil demand."
OPEC repeatedly lowers demand forecasts. On June 11, OPEC’s latest monthly oil market report cut its 2026 global oil demand growth forecast to 970,000 barrels per day, down from the previous estimate of 1.17 million barrels per day—marking the second consecutive monthly downgrade. This trend signals that even oil-producing countries are cautious about the outlook for global oil consumption.
US refined oil consumption shows signs of weakness. US gasoline inventories have built up more than expected, which the market sees as a clear negative signal. According to Longzhong Information’s refined oil analyst, the impact of new energy alternatives and high oil prices continues to suppress end-user consumption, and gasoline demand remains weak. Under the dual pressures of high prices and a weakening economic outlook, demand for automotive fuels has started to decline.
Hawkish Fed signals weigh on economic expectations. On June 17, the first FOMC meeting chaired by new Fed Chair Kevin Walsh concluded with the federal funds rate target range held steady at 3.50%–3.75% for the fourth consecutive meeting. However, the hawkish tone was more significant. The dot plot shows the median rate for 2026 rising to 3.8%, implying one more rate hike from the current 3.625%. Nine out of 19 policymakers now see the need for a rate hike, compared to none three months ago. Due to high oil prices, the 2026 PCE inflation forecast jumped from 2.7% in March to 3.6%. Nearly half of Fed officials no longer believe that simply keeping borrowing costs steady will be enough to bring inflation down to the 2% target. This policy stance means higher borrowing costs and potentially slower economic growth, both of which weigh on oil demand.
Diverging forecasts from major institutions also reflect market uncertainty. Goldman Sachs cut its Q4 2026 Brent crude forecast from $90 to $80 per barrel. Morgan Stanley lowered its Q3 Brent average price estimate from $100 to $90 per barrel. Citi reduced its Q3 and Q4 2026 forecasts to $75 and $70 per barrel, respectively. Citi analysts noted that if the market is pricing in the agreement itself rather than certainty about medium-term flows through the Strait of Hormuz, crude prices could fall another $10–$15 per barrel from current levels.
Energy Sector ETFs Under Pressure: Capital Outflows and NAV Declines
The sharp drop in oil prices has directly impacted energy sector ETFs. Exchange-traded products tracking the energy sector have generally posted significant declines, with sustained capital outflows.
On June 16, the Energy ETF Huitianfu (159930) closed down 1.93%, with net outflows of 70.27 million yuan in main funds. On the same day, GF CSI All Energy ETF (159945) closed down 2.18%, with a turnover of 14.83 million yuan. The Energy & Chemical ETF (159981) led losses on June 15, dropping 6.79%. The S&P Oil & Gas ETF (513350) fell 5.65%, and the Coal ETF (515220) dropped 4.55%.
Looking at a longer time frame, the GF Energy ETF’s NAV fell 5.32% over the past week and 5.96% over the past month. Its major holdings—including China Shenhua, PetroChina, Shaanxi Coal, and CNOOC—have all seen varying degrees of decline.
The weakness in energy sector ETFs reflects a market reassessment of energy companies’ profit outlooks. When oil prices were in the $90–$110 per barrel range, upstream producers enjoyed robust profit margins. As prices fall back to the $74–$80 range, margins are compressed enough to trigger capital reallocations, even though prices remain historically high. CLSA expects Brent crude to average $94 per barrel in the first half of this year, staying above $80 per barrel in the second half—even if this forecast holds, the average price in the second half would still be about 15% lower than in the first half.
Short-Term Logic vs. Medium-Term Variables
Oil price formation is currently in a delicate transition. In the short term, the supply shock from the US-Iran deal has been quickly digested by the market, with WTI crude dropping from above $80 to below $74 in just three trading days—a weekly decline of up to 10%. However, as many analysts have pointed out, the room for further declines may be limited.
On the supply side, even though the agreement has been signed, supply recovery will be gradual. Analysts at Founder CIFCO Futures note that despite the deal, Gulf oil exports remain highly dependent on the Strait of Hormuz. Shipping recovery and increased supply will take time, so short-term supply tightness will continue to support oil prices. CITIC Construction Investment also believes the market is underestimating short- and medium-term upside risks for oil prices—the Strait of Hormuz has been closed for weeks, more wells have been forced to shut, and prolonged shutdowns could result in permanent loss of some production capacity.
On the demand side, the arrival of the summer driving season may partially offset demand concerns. According to the latest EIA data, US commercial crude inventories fell by 8.26 million barrels for the week ending June 12—almost double the expected 4.6 million barrel decline—marking the tenth consecutive week of inventory draws and pushing crude stocks to their lowest level in more than 40 years. Such extremely low inventory levels mean the market has very limited buffers against any supply shocks, providing downside support for oil prices.
Nevertheless, medium-term uncertainties cannot be ignored. The IEA’s warning of a severe supply glut by 2027, the Fed’s potential rate hike path, and slowing global economic growth could all exert sustained downward pressure on oil prices in the coming quarters. The US-Iran agreement’s 60-day negotiation period and unresolved issues such as Iran’s nuclear program mean that geopolitical risks have not been fully eliminated—they have simply entered a temporary observation window.
Conclusion
On June 18, 2026, WTI crude fell below $74 and Brent crude lost the $77 level, marking a dramatic adjustment in international oil prices as the market shifted from a regime dominated by geopolitical risk premiums to one driven by fundamentals, under the dual pressure of the US-Iran peace deal and demand concerns. The anticipated reopening of the Strait of Hormuz and the lifting of Iranian oil sanctions have removed the core geopolitical supports for high oil prices on the supply side. Meanwhile, OPEC’s repeated demand downgrades, weak US refined oil consumption, and the Fed’s hawkish turn continue to weigh on the demand side. The broad weakness in energy sector ETFs is a natural reflection of this logic in capital markets.
Within the new $74–$80 price range, the market is recalibrating its assessment of supply and demand fundamentals. The gradual pace of supply recovery and extremely low inventory levels provide support against further declines, while medium-term risks of oversupply and weakening demand set an upper ceiling. Whether this equilibrium can persist will depend on the quality of the US-Iran deal’s implementation during the 60-day negotiation period, the strength of summer oil demand recovery, and the trajectory of the global macroeconomy.
