Oil slips as Hormuz flows return, glut fears rise

Oil prices moved lower on June 30, 2026 as traders focused on signs that global crude supply may be more abundant than previously expected. The shift in sentiment followed a pickup in shipping activity through the Strait of Hormuz and fresh indications that physical oil markets are loosening.

Brent crude (UKOIL) ended the month with its largest decline since March 2020, underscoring the speed and magnitude of the recent sell-off. Energy analysts described the pullback as more aggressive than anticipated, reflecting how quickly the market narrative has moved from potential shortages to concerns about oversupply.

A key factor behind the price adjustment has been the faster-than-expected return of tanker traffic through the Strait of Hormuz, a critical chokepoint for global oil shipments. Increased flows through the waterway have reduced fears of prolonged supply disruption from the region.

Analysts have warned that if Hormuz flows recover to a substantial share of their pre-conflict levels, global supply could tip into a surplus. The improving logistics picture has coincided with continued robust exports from major producers, further reinforcing expectations of ample supply.

Against this backdrop, Morgan Stanley (MS) reduced its oil price forecasts for the second time in roughly two weeks. The bank highlighted the combination of recovering Hormuz flows, strong US supply and softer Chinese demand as key drivers behind its decision.

In its latest note, the bank emphasized that the physical oil market is showing bearish signals, including a contango structure in futures prices and distressed physical differentials. These indicators point to near-term looseness in supply, reinforcing the view that the market could swing back into surplus as attention turns toward 2027.

The steep decline in Brent (UKOIL) over the month has unfolded as traders track diplomatic developments, including US-Iran talks, alongside changing supply fundamentals. The restoration of some shipping activity through Hormuz has reduced risk premiums that previously supported prices.

With prices adjusting to both improving Middle East flows and signs of weaker demand growth in key consuming regions, market participants are recalibrating expectations for the balance of supply and demand. The result has been increased pressure on crude benchmarks and a more cautious outlook for the near term.