Crude oil prices ended the second quarter with a near 40% decline, the sharpest since 2020, fueled by growing expectations of a peace agreement between the United States and Iran. The drop reflects a market pricing in a rapid return of Iranian crude and a de-escalation of tensions across the Middle East.
Despite the price plunge, physical supply flows through the Strait of Hormuz have yet to normalize. According to ING commodity strategists Warren Patterson and Ewa Manthey, total tanker crossings — both inbound and outbound — were estimated at around 11 on Tuesday, down significantly from a peak of 24 just days earlier. That suggests actual supply bottlenecks persist even as traders bet on a diplomatic resolution.
The discrepancy between financial markets and physical flows raises questions about the durability of the selloff. While the peace narrative has driven a wave of speculative short-selling, the infrastructure for moving crude remains constrained. Tanker traffic data indicates that shippers are still exercising caution, and insurance premiums for Hormuz transits likely remain elevated.
Geopolitically, the optimism may be premature. A formal US-Iran deal has not been finalized, and regional players — including Gulf states and Israel — have yet to publicly endorse any framework. Meanwhile, Iran's export capacity remains under sanctions, with any near-term ramp-up requiring not just a political accord but also logistics and reinsurance support.
ING strategists caution that markets may be overestimating the speed of normalization. If tanker counts fail to rebound quickly, oil prices could see a corrective bounce. The current disconnect between price optimism and on-the-ground reality makes the Q2 rout vulnerable to a sharp reversal.