Macquarie warns of oil glut if U.S.-Iran pause leads to deal

Oil markets face the prospect of a rapid return to oversupply before year-end if Washington and Tehran translate their current pause in hostilities into a lasting diplomatic resolution, Macquarie warned on Monday as crude prices tumbled.

A Decaying Put Option

Vikas Dwivedi, Macquarie's global energy strategist, said in a July 24 interview reported by Bloomberg that de-escalation between the United States and Iran is "weeks away, not months." He likened the situation to a decaying put option, with fewer than 100 days until the November midterm elections serving as the expiration date.asiae

Macquarie forecasts that if tensions subside, oil inventories would rebuild quickly, producing an oversupply of 2 million barrels per day in the fourth quarter of 2026 and as much as 4 million barrels per day in the first quarter of 2027. The warning echoes similar concerns from Morgan Stanley ↗ 0.04%, which recently cut its Brent price forecast for the second half of 2026 to $75 per barrel, citing faster-than-expected reopening of the Strait of Hormuz.spragueenergy+1

Pause in Fighting Sends Crude Lower

The analysis landed as oil prices fell sharply on Monday. Brent crude dropped more than 4 percent and U.S. West Texas Intermediate fell roughly 4.5 percent after the United States and Iran paused attacks for a third consecutive day, according to Reuters.reuters

The U.S. military halted nearly two weeks of daily strikes on Friday as diplomats sought to give peace talks "some space," according to CNBC. National Security Adviser Mike Waltz said on Sunday that President Donald Trump is allowing discussions to unfold, with negotiations "continuing at all levels, from technical aspects to the highest echelons," as reported by CNN.cnbc+1

Iran said it was reciprocating the pause as part of a China-led push to resume stalled diplomatic efforts in Pakistan, according to NPR. Still, analysts caution that major hurdles remain, including the future of Iran's nuclear program, sanctions relief, and Tehran's support for proxy groups in the region.npr+1

Political Pressure Mounts

The political calculus is clear. Gas prices reached $4.56 per gallon before Memorial Day and have since declined only modestly, according to Politico, which reported that Republicans have grown anxious about the economic toll of sustained conflict heading into the midterms. Former Commerce Secretary Wilbur Ross told Fortune that oil remains the administration's greatest political risk, warning that a return to $5-per-gallon gasoline would be electorally devastating.fortune+1

Whether the current pause solidifies into a permanent ceasefire — or collapses as previous attempts did in July when fighting resumed after an April truce expired — will determine whether the geopolitical risk premium unwinds or rebuilds in the weeks ahead.