Analysts Expect Brent To Trade In $89–98 Range Amid Tight Supply, Fragile Diplomacy And Inventory Drawdowns

Analysts believe Brent crude prices are likely to remain highly sensitive to geopolitical developments over the coming months, with a broad trading range of $89–98 per barrel emerging as the most probable near-term scenario.

The latest market movement reflects a shift away from extreme crisis pricing witnessed earlier this year toward a more uncertain “risk premium adjustment” phase, where traders continue to react sharply to diplomatic headlines, military developments and supply data.

WTI Crude Slips As Markets Price In Diplomatic Progress

WTI crude futures traded below $93 per barrel during the week, hovering near five-week lows, as optimism surrounding ongoing US-Iran negotiations eased immediate fears of severe supply disruptions.

The decline comes after crude prices had rallied sharply in March and April amid escalating tensions in the Gulf region and concerns regarding shipping disruptions through the Strait of Hormuz.

However, despite softer prices this week, analysts caution that oil markets remain far from stable.

Energy traders continue to price in a significant geopolitical risk premium due to uncertainty surrounding the future of Iran-related sanctions, nuclear negotiations and the security of Middle East energy routes.

US-Iran Negotiations Remain The Key Market Trigger

Diplomatic developments between Washington and Tehran continue to dominate global energy markets.

US President Donald Trump reportedly indicated that discussions aimed at stabilising the Strait of Hormuz and restoring normal shipping activity are progressing toward a preliminary framework agreement.

At the same time, US Secretary of State Marco Rubio acknowledged that negotiations remain complex, with major disagreements continuing over Iran’s nuclear programme, uranium reserves and long-term regional security arrangements.

Although markets have responded positively to signs of diplomatic engagement, analysts believe traders will remain cautious until a formal agreement is signed and actual crude flows through the region are fully restored.

Strait Of Hormuz Remains Central To Global Energy Security

The Strait of Hormuz continues to be one of the world’s most strategically important oil transit corridors, carrying a substantial portion of global crude exports from Gulf producers to international markets.

Any disruption to the shipping route can immediately impact global energy prices, freight costs and supply expectations.

Market estimates suggest Brent crude currently carries a geopolitical premium of nearly $8–12 per barrel because of ongoing tensions surrounding the region.

This premium is expected to remain embedded in oil prices unless geopolitical risks decline significantly and supply conditions stabilise.

Weak Global Demand Adds Pressure On Prices

While supply risks continue to support oil prices, softer global demand trends are limiting the upside momentum.

Recent economic indicators from major economies suggest that consumption growth is slowing amid high inflation, elevated interest rates and weaker consumer spending.

In the United States, manufacturing activity improved during May, but analysts noted that part of the strength was linked to inventory stockpiling rather than sustainable end-user demand.

Meanwhile, China’s industrial production remained relatively resilient, but retail spending growth weakened sharply, reflecting slower domestic consumption and rising substitution toward alternative energy sources.

Chinese crude oil imports reportedly declined compared to last year, adding further pressure on demand expectations.

In Europe, rising energy costs have pushed inflation higher again, while producer prices have started turning positive after a prolonged slowdown.

Global Oil Inventories Continue To Tighten Rapidly

Despite weaker demand indicators, the broader supply situation remains structurally tight.

Global oil inventories have witnessed sharp drawdowns over the past two months, with analysts estimating that observed inventories fell by more than 240 million barrels combined during March and April.

OECD on-land inventories also declined significantly, reducing emergency supply buffers available to stabilise markets during prolonged disruptions.

According to market estimates, global inventories are currently falling at one of the fastest rates seen in recent years.

Analysts warn that if supply disruptions persist and Hormuz flows fail to normalise quickly, strategic reserves could tighten further, increasing the risk of another sharp price rally.

OPEC Spare Capacity Shrinks

Another factor supporting long-term oil prices is the decline in available spare production capacity among major oil-producing nations.

Analysts estimate that OPEC’s spare production capacity has dropped sharply compared to pre-conflict levels, reducing the cartel’s ability to quickly offset unexpected supply shocks.

At the same time, Gulf production continues to remain below normal levels due to ongoing geopolitical uncertainty and operational disruptions.

This reduced supply cushion has effectively raised the structural floor for global oil prices compared to earlier years.

Analysts Outline Three Possible Oil Price Scenarios

Energy market analysts currently see three major scenarios for crude oil prices over the next several quarters.

Full De-Escalation Scenario

If a comprehensive US-Iran agreement is signed and shipping through the Strait of Hormuz normalises quickly, analysts expect Brent crude to gradually decline toward an average of around $89 per barrel in late 2026, with further moderation possible in 2027.

This scenario would likely remove most of the geopolitical risk premium from current prices.

Partial Resolution Scenario

Under a more likely partial-resolution outcome, where negotiations continue but uncertainty persists, Brent crude is expected to remain within the $89–98 per barrel range.

Analysts believe tight inventories and limited spare production capacity would continue supporting prices even if tensions ease moderately.

Conflict Escalation Scenario

If negotiations collapse and military tensions intensify again, crude prices could surge sharply.

Analysts warn Brent crude could revisit the $115–130 range, while temporary spikes beyond $140 per barrel cannot be ruled out during severe supply disruptions.

Structural Floor For Oil Prices Has Shifted Higher

Market experts believe the geopolitical events of 2026 have permanently altered the long-term oil market structure.

Before the latest Middle East conflict, Brent crude’s structural floor was estimated around $58–68 per barrel. However, due to tighter supply conditions, shrinking spare capacity and infrastructure disruptions, analysts now believe the long-term support zone has shifted closer to $75–80 per barrel.

As a result, oil markets are expected to remain highly event-driven and sensitive to geopolitical developments for the foreseeable future.