Brent: How long will it take to reach $70?

•    Geopolitics has stripped the US dollar’s rivals of their key advantages.

•    Oil prices may return to pre-conflict levels sooner than expected.

The US dollar is extending its lead in the forex market, driven by confidence in the Fed’s monetary tightening. Bank of America believes the Fed will raise rates three times in 2026 due to a strong economy and a more aggressive approach to tackling inflation under Kevin Warsh. At the same time, the fall in oil prices removes the main argument for monetary tightening by rival central banks, led by the ECB.

During the conflict in the Middle East, the prevailing view in the market was that Brent would not return to pre-war levels until almost the end of the year. However, as soon as the Strait of Hormuz was reopened, oil flows surged and Brent crude plummeted below $78 per barrel. According to US Central Command, traffic over the weekend alone amounted to 17 million barrels per day. Bloomberg cites a figure of 20 million barrels per day over the last three days, indicating a full restoration of flows.

Goldman Sachs believes that, over time, shipments through the Strait of Hormuz will fall to 70 per cent of the levels seen at the end of February, as countries utilise alternative routes developed during the US-Iran standoff. Coupled with a decline in demand from China, this could put long-term pressure on Brent.

There is a growing consensus in the market that China’s oil imports will not return to previous levels. In February, they stood at 12.6 million bpd, but in the second quarter, they fell by 3.3 million bpd compared with the same period in 2025. The shift away from diesel and petrol towards alternative energy sources is reducing demand, which is contributing to the fall in Brent prices.

In the short term, the peak in North Sea crude prices is the result of the US granting Iran a 60-day licence to sell its oil for dollars. This throws a lifeline to a faltering economy and offers hope for progress in negotiations on the nuclear programme. Increased production and exports from the Islamic Republic are a ‘bearish’ factor for Brent.

However, the market is concerned about how quickly Gulf states will restore production. Following the agreement between Washington and Tehran, Iraq’s call for companies to rapidly increase output to more than 3 million barrels per day is acting as another catalyst for selling in the oil market.