Morgan Stanley Slashes Oil Price Forecasts as Hormuz Flows Rebound Faster Than Expected

Morgan Stanley has slashed its oil price forecasts, citing a faster-than-expected recovery in flows through the Strait of Hormuz and persistent headwinds from strong U.S. supply and weak Chinese demand that increase the risk of a surplus.

In a note dated Monday, analysts led by Martijn Rats, Charlotte Firkins and Amy Gower lowered their third-quarter 2026 Dated Brent forecast by $15 to $75 a barrel, with further declines expected by the third quarter of next year to $70.

The analysts said exports via the Strait of Hormuz are bouncing back more quickly than anticipated. Meanwhile, the so-called “twin solvers”—high U.S. exports and low Chinese imports—that helped the market adapt in recent months remain largely in place.

Despite a brief escalation in the conflict over the weekend that saw two ships hit and caused a temporary slowdown in traffic, tanker companies and their crews are increasingly showing willingness to navigate the waterway. That is a critical step toward normalizing global oil markets and unlocking millions of barrels of supply from the energy-rich region.

Morgan Stanley reported that 35 oil and gas tankers passed through the strait from the Persian Gulf on Thursday—the first time daily traffic returned to the pre-conflict range of 30 to 40 vessels since hostilities began in February. The bank estimates that to balance the oil market in 2027, flows through Hormuz only need to recover to about 65% of pre-conflict levels, or roughly 11 to 12 million barrels per day.

Brent crude futures, which spiked above $126 a barrel in April amid the conflict’s peak, have since erased those gains as Iran and the U.S. pursue talks to permanently end the four-month war. The most-active September contract settled at $73.91 on Monday.

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