Oil fell over 2% on an Iraq–Kurdish supply deal, but Iran tensions may keep prices above $100 per barrel, according to OCBC.

Oil prices slide over 2%

Oil prices declined during Wednesday’s Asian session, pulling back from recent gains after Iraq and the Kurdistan Regional Government agreed to restart crude exports via Turkey’s Ceyhan terminal.

The agreement helped ease some concerns over supply disruptions stemming from the U.S.-Israel conflict with Iran. However, Brent crude remained above $100 per barrel, as the war entered its third week with little indication of de-escalation.

Markets also stayed cautious ahead of the Federal Reserve’s policy decision later in the day, amid worries that persistent inflation—fueled in part by higher oil prices linked to the Iran conflict—could prompt a more hawkish stance.

By 00:18 ET (04:18 GMT), Brent futures had dropped 2.3% to $101.05 per barrel, while West Texas Intermediate (WTI) crude fell 3.3% to $93.03 per barrel.

WTI faced additional pressure after data from the American Petroleum Institute showed U.S. crude inventories rose by 6.6 million barrels last week, defying expectations of a 0.6 million barrel draw. This data often signals a similar trend in official government figures, due later Wednesday.

On Tuesday, Iraq and Kurdish authorities finalized a deal to resume oil shipments to Turkey’s Ceyhan hub starting Wednesday. The move comes as major oil producers seek alternative export routes beyond the Strait of Hormuz, especially after Iran effectively blocked the critical passage earlier this month.

Iraq had reportedly aimed to export at least 100,000 barrels per day through Ceyhan, after shutting in around 70% of its production due to the conflict. Still, the volumes from Ceyhan are expected to cover only a small portion of the supply gap caused by disruptions in Hormuz.

Oil prices also eased after reports that the United Arab Emirates may support a U.S.-led initiative to secure shipping through the Strait of Hormuz. Iran had largely halted traffic through the strait—which handles roughly 20% of global oil supply—in retaliation for U.S. and Israeli strikes.

The UAE could become the first country to back Washington’s efforts, though most allies have so far declined to participate. Meanwhile, tensions remain high, with Iran escalating attacks on vessels near Hormuz following strikes on a key export facility. Reports also indicated that Iranian security chief Ali Larijani was killed in an Israeli strike, raising the risk of further retaliation.

Despite the pullback, oil prices remain supported by ongoing supply concerns. Brent has surged more than 40% since the conflict began in late February. Analysts at OCBC expect crude prices to stay above $100 per barrel through at least mid-2026, citing the lack of clear prospects for easing tensions.

Oil prices to remain above $100/bbl

Oil prices are expected to stay above $100 per barrel in the near term, as the U.S.-Iran conflict shows little indication of easing, according to analysts at OCBC.

The bank noted that with the conflict now in its third week and no meaningful diplomatic progress, crude flows through the Strait of Hormuz remain heavily restricted, keeping global supply tight.

OCBC has revised its outlook, projecting Brent crude to hover around $100 per barrel until mid-2026—well above its earlier estimate of roughly $70—before gradually declining toward $70 by early 2027 as disruptions ease.

Analysts warned that prolonged shipping disruptions are forcing Gulf producers to cut output, increasing the likelihood that short-term supply issues could turn into more sustained losses.

Tanker activity in the Strait of Hormuz has dropped sharply due to security concerns, effectively disrupting a crucial route responsible for about 20% of global oil consumption.

Although some shipments have cautiously resumed following Iranian inspections and potential stockpile releases from the International Energy Agency, overall volumes remain significantly below normal.

OCBC added that mitigation efforts—such as rerouting through alternative pipelines, tapping strategic reserves, and ongoing Iranian exports—could replace up to 10 million barrels per day. However, this would still leave a notable supply shortfall if disruptions persist.

The bank concluded that oil markets are nearing a “moderately severe” supply shock scenario, with risks tilted toward further price increases if geopolitical tensions continue.

Sources: Ambar & Ayus