How the US-Iran Deal Could Affect Oil Prices

Summary

Podcast Summary: Exchanges by Goldman Sachs

Episode: How the US-Iran Deal Could Affect Oil Prices
Date: June 17, 2026
Host: Alison Nathan
Guest: Don Striven, Co-Head of Global Commodities Research

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Overview

This episode of "Exchanges" explores the potential impacts of the newly reached US-Iran deal, which promises to end the conflict and reopen the strategically critical Strait of Hormuz. Alison Nathan interviews Don Striven to unpack how these developments might shape global energy markets and oil prices, considering both recent trends and forward-looking scenarios. The conversation covers expected supply recovery, market optimism, long-term demand shifts, price forecasts, and geopolitical implications.

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Key Discussion Points and Insights

1. Immediate Impact of the Conflict and the US-Iran Deal

Timestamps: 00:46–02:42

• Don highlights a significant drop in oil prices—from over $120/barrel to the low $80s—even though the Middle East lost ~14% of global production during the conflict.
• The optimism in markets comes from the expectation that Middle Eastern supply will recover soon and flows through the Strait of Hormuz will be restored by end of July.
• Markets have shown flexibility: global demand adjusted down by ~5%, while non-Middle Eastern supply was resilient.
• "Oil prices have sold off pretty significantly from over $120 with Brent now essentially in the low 80s. In the face of the largest oil supply shock ever, we lost roughly 14% of global production from the Middle East." (Don Striven, 00:46)
• Key uncertainty: whether Iran will fully commit to increasing export flows, hinging on logistical willingness and the absence of renewed strikes.
• The critical moment: watching ship movements from Friday, when the MOU (Memorandum of Understanding) is set to be signed (01:56).

2. Near-Term Price Expectations and Market Sentiment

Timestamps: 02:42–04:41

• The market remains optimistic, but risk persists—prices could fall further if flows resume normally, but full recovery isn’t guaranteed.
• 2024–2027 forecasts:
  • Brent to average $75 per barrel next year (2027), with short-term prices a bit higher due to low inventories and a persistent security risk premium.
  • As of recording, Brent at ~$80/barrel, still $20 above pre-war levels.
  • "We do think that there will be a meaningful disruption risk security premium in oil prices because the risk of supply disruptions is high." (Don Striven, 03:38)
• Even with optimal outcomes, prices likely remain elevated for years to come compared to pre-war benchmarks.

3. Demand Recovery and Long-term Trends

Timestamps: 04:41–05:52

• Most demand losses (from less driving, flying, etc.) are expected to recover—about 90% of the 5 million barrels/day loss bouncing back by 2027.
• Yet, some changes are "sticky", partly due to energy transitions—electric vehicle adoption, especially in China, is on the rise.
• “We think that oil demand will be about half a million barrels per day lower in 2027 relative to a no-war counterfactual, in part because if you look at EV sales, especially in China, they are surging.” (Don Striven, 05:44)
• The war accelerated existing trends toward alternative energy and demand flexibility.

4. Risks and Alternative Price Scenarios

Timestamps: 05:53–07:19

• Upside risk: If the Strait does not fully reopen or recovery is slow, Brent could surpass $130/barrel by year-end. This would persist until new pipelines accommodate lost shipping capacity.
• Downside risk: If recovery is faster and demand losses persist, Brent could fall to $60 by 2027.
• "Price increases in the upside scenario, $50 extra from here, are significantly bigger than the $20 of downsides in the downside scenario." (Don Striven, 06:56)
• Balance of risks: Both scenarios are roughly equally likely, but the upside move is far more dramatic.

5. Broader Geopolitical Lessons & Takeaways

Timestamps: 07:19–08:55

• Two key lessons from the crisis:
  1. Commodity supplies are more vulnerable in an increasingly fragmented world—a risk highlighted by Iran’s ability to disrupt major shipping lanes.
  2. Markets and countries (notably China) have shown remarkable adaptability, switching fuels, ramping up EV adoption, and shifting import strategies.
• “China in particular has revealed an incredible ability to adjust to this system…The fact that Chinese import volumes of crude are down 4 to 5 million barrels per day year over year is likely the single most important reason why oil prices are not in triple digit territory at the moment.” (Don Striven, 07:51)
• The future may bring more frequent big disruptions, but also continued surprises in system resilience and adaptability.

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Notable Quotes and Memorable Moments

• “Oil prices have sold off pretty significantly...in the face of the largest oil supply shock ever, we lost roughly 14% of global production from the Middle East.” (Don Striven, 00:46)
• “Markets have largely priced in the recovery…we see the skew of risks to our forecast and to market pricing as two sided. But I still skewed to the upside.” (Don Striven, 02:54)
• “We do think that there will be a meaningful disruption risk security premium in oil prices because the risk of supply disruptions is high.” (Don Striven, 03:38)
• “Most of the demand losses will unwind...we expect about 90% of the 5 million barrels per day of demand losses to be bouncing back by 2027.” (Don Striven, 04:53)
• “In terms of probabilities [scenarios are] maybe roughly equal. But the key feature is bigger upside in the upside scenario than downside in the downside scenario.” (Don Striven, 06:56)
• “China…has revealed an incredible ability to adjust to this system...The fact that Chinese import volumes of crude are down 4 to 5 million barrels per day year over year is likely the single most important reason why oil prices are not in triple digit territory at the moment.” (Don Striven, 07:51)

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Timeline of Important Segments

| Timestamp | Segment & Highlights | |-------------|---------------------| | 00:05-00:46 | Introduction and setup of the US-Iran deal’s significance | | 00:46-01:56 | Effect on oil markets during conflict; market optimism explained | | 01:56-02:42 | Key variables for Middle East export recovery; watching upcoming developments | | 02:42-04:41 | Price forecasts and reasons for current elevated prices | | 04:41-05:52 | Demand recovery and the persistent impact of energy transition | | 05:53-07:19 | Upside/downside price scenarios and risk assessment | | 07:19-08:55 | Big-picture lessons about commodity markets and resilience | | 08:55-09:00 | Conclusion of the conversation |

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Conclusion

The episode uncovers complex dynamics shaping current and future oil prices, emphasizing the interplay between geopolitical risk, market adaptability, and the accelerating energy transition. Don Striven’s insights both quantify the scenario risks and highlight the key takeaway: while disruption risk in a fragmented world is high, adaptability—from both the market and major players like China—continues to anchor price stability, even in the face of massive shocks.

Transcript

[A]

The US and Iran have reached a deal to end the conflict and reopen the Strait of Hormuz. What could that mean for energy markets and for oil prices in particular? I'm Alison Nathan and this is Colman Sachs Exchanges. Today I'm joined once again by Don Striven co head of global commodities research in Goldman Sachs Research. Don, I said last time we spoke that you'd be back again soon. And here you are.

[B]

Accurate prediction, which is challenging in this environment.

[A]

Absolutely. So, Don, maybe you could start by just summarizing the impact this conflict has had on oil markets and of course, in particular the significance of this interim deal between the US and Iran.

[B]

So oil prices have sold off pretty significantly from over $120 with Brent now essentially in the low 80s. In the face of the largest oil supply shock ever, we lost roughly 14% of global production from the Middle East. Why are prices down so significantly? I think the market is pricing in a relatively optimistic base case for the recovery of Middle Eastern supply. In line with our base case, we assume flows to the Strait start to recover and exports from the region go back to normal levels by the end of July. And second, we have seen remarkable flexibility in the global oil market outside of the Middle east with a roughly 5% reduction in demand and with pretty strong supply outside of the Middle East.

[A]

Right, but just to be clear, obviously prices were on the decline from the peak which happened in April. But we've seen a big sell off since these headlines which has given the market more optimism that we're actually going to see the restart of flows. But talk to us a little bit about what that could look like. Your current forecast predicts flows returning to normal by the end of July. So what do we have in store for us between now and then for

[B]

exports from the region to fully go back to normal? Flows to the Strait have to go back to roughly 70% of normal levels because we have seen a lot of redirection via pipelines. In particular, I think that the key question really is, is there willingness within Iran to see increases inflows? Yes, there may be some logistics constraints, but I think it all boils down to the question, does Iran want to see higher flows? And if yes, do we see a few shippers that go through successfully without strikes? And if so, I think the other shippers are likely to follow. But we have seen a false start before, so we'll be laser focused on counting ships, especially from Friday onwards when the MOU is supposed to be signed in Switzerland.

[A]

Right. So despite the market optimism, there's still a tremendous amount of uncertainty and we can't underscore that enough. But if we begin to see that, how much farther could prices potentially fall?

[B]

So we have some additional downside to prices. We see Brent averaging 75 next year. But I would say that the market has largely priced in the recovery in flows and production from the Middle east that we expect. And so we see the skew of risks to our forecast and to market pricing as two sided. But I still skewed to the upside on that because it's not a given that the strait will reopen fully. It's not a given that even if it reopens fully that it remains open, especially if the thornier nuclear discussions will be held in coming weeks and months.

[A]

Right now, Brent was trading around $80 per barrel. That's still much higher than where it was at before the war. So you expect prices to remain elevated.

[B]

Elevated relative to where we were before the war. But if I Look at our 2027 Brent average price forecast of 75, that's in line with term fair value. In the short term, though, we do see somewhat higher prices than normal because inventories are quite low. While the deficit has been less large than expected, we're still in a 5% deficit. Inventories have been depleting and that means somewhat higher prices. And also we do think that there will be a meaningful disruption risk security premium in oil prices because the risk of supply disruptions is high. And I think markets will continue to price that in somewhat.

[A]

Right. So there still is a lingering impact in this conflict. Even if everything goes smoothly from here in the sense that we are expecting oil prices to be, I don't know, roughly $20 per barrel higher than before this conflict ever happened.

[B]

Exactly.

[A]

So don't just be perfectly clear. Go over your price forecast one more time. $80 per barrel by the end of the year for Brent.

[B]

That's right. Which is 75 for double ti. And I'm moving to 2027. We have Brent at 75 and double ti at 70.

[A]

Okay, so we've been talking mostly about supply here. You very briefly mentioned demand. If prices fall, will we see demand rising again? And how do you factor that into this forecast?

[B]

Yeah, so we think that most of the demand losses and global oil demand is down by about 5%. We think that most of those losses will unwind. We expect about 90% of the 5 million barrels per day of demand losses to be bouncing back by 2027. Because typically when you see these demand losses in response to higher prices, where higher Prices are driven by negative supply shocks. You typically see a pretty quick recovery. That's what we saw in 2022 after the Russia Ukraine episode. That's what we saw in 2011 around the Libya war. That said, we pencil in some stickiness in demand losses. We think that oil demand will be about half a million barrels per day lower in 2027 relative to a no war counterfactual, in part because if you look at EV sales, especially in China, they are surging.

[A]

Right. So we have essentially embarked on trends that we think are going to continue as a result of this war, both on the supply side as well as on the demand side.

[B]

That's right.

[A]

Again, we just reviewed your price forecasts. Talk to us again about the risks to those forecasts.

[B]

Upside on that. So we laid out a price upside scenario where exports from the Gulf only gradually recover and where the Hormuz Strait never fully reopens. And in such a scenario where exports from the region only gradually recover by 10 million barrels per day over the next year and a half, we see actually oil exceeding $130 per barrel for Brent by year end. But then over time, as pipeline capacity gets added, the markets mostly manage the shock. But it would mean significantly higher oil prices for longer now prices could be even lower than our base case. We consider a price down scenario, price downside scenario with Brent at 60 in 2027. In a scenario where the Strait reopens even more quickly, where some of the demand losses that we discuss are more persistent, and where we see even a stronger supply response from supply outside of the Middle East.

[A]

But again, which one is more likely?

[B]

So I think that the main feature of the outlook for in terms of risk to oil prices is that price increases in the upside scenario, $50 extra from here, are significantly bigger than the $20 of downsides in the downside scenario. I think in terms of probabilities maybe roughly equal. But the key feature is bigger upside in the upside scenario then downside in the downside scenario.

[A]

So very interesting. Obviously we have a wide distribution of outcomes here, but let's zoom out for a moment, Don, as we conclude our conversation. Essentially, this episode has revealed tremendous power on the part of some countries like Iran, to essentially disrupt this very vital shipping artery. We've also seen tremendous leverage from countries, some countries around the world, in adapting to that disruption. So when you take a step back and think about the lessons you've learned from this episode, what is most striking to you?

[B]

Yeah, I think you outlined the two key lessons. One, commodity supply is at an even greater risk of disruptions in a highly jubilee fragmented world. But then on the other side, China in particular has revealed an incredible ability to adjust to this system with significant switching to other energy sources such as coal, such as power, with a surge in EV volumes. And the fact that Chinese import volumes of crude are down 4 to 5 million barrels per day year over year is likely the single most important reason why oil prices are not in triple digit territory at the moment.

[A]

So just tremendous ability to adapt to this very big shock.

[B]

Yes, so the future may be a future with more frequent large supply disruptions in a highly fragmented world where the US and China are competing for geopolitical power, for AI dominance, for commodity dominance, but it may also be a world where we'll be surprised by the ability to deal with those supply disruptions.

[A]

That's a pretty positive note to end on right now. We'll see what happens with this war and these flows. But thanks again for joining us, Don.

[B]

Thanks a lot Alison.

[A]

This episode of Goldman Sachs Exchanges was recorded on Tuesday, June 16, 20, 2026. I'm Allison Nathan. Thanks for listening.

[C]

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