Oil Is Heading for a Glut — and the Price War Could Be Brutal

Currently, Brent crude has already slipped to $72.80 a barrel — back to levels seen before the start of the US military operation against Iran.

Ten days ago, when Brent was trading at $83.50, there were already strong grounds to expect a move back towards pre-war levels. Following the agreement between the US and Iran to reopen the Strait of Hormuz, Brent crude fell to $83.50 a barrel.

At that point, prices were still above the levels seen in February, before the US military operation began. But if the agreement holds, there is every reason to expect oil to return to its pre-war range. It is entirely plausible that the current shortage in the oil market could, over time, turn into a surplus, as producing countries begin pumping flat out.

We are already seeing reports that the UAE is actively ramping up exports. It is worth recalling that the UAE left OPEC on 1 May and is no longer bound by any production limits.

Iraq intends to increase output and is even reportedly considering leaving OPEC unless its quota is raised.

The Saudis have stayed quiet so far, but what can they do in these circumstances? They are unlikely to cut production alone simply to prop up prices. At some point, they too could start sharply increasing output and trigger a price war in the fight for market share. After all, they are hardly going to hand market share to their neighbors — the UAE and Iraq — without a fight.

We have seen this before. In March 2020, when the OPEC+ deal collapsed, oil prices plunged towards $30–40 a barrel. Adjusted for dollar inflation since then, that is roughly equivalent to $40–50 a barrel today.

So a further fall in oil prices looks entirely realistic.

The key risk for the oil market now is that the geopolitical premium could disappear faster than producers can adapt. If the Strait of Hormuz remains open, supply normalizes and exporters start competing for market share, the previous shortage could quickly turn into an oversupply problem. In that scenario, oil would not just be falling on peace headlines — it would be weighed down by real additional barrels entering the market.

The real danger begins if major producers decide that defending price is no longer worth it and that protecting market share matters more. At that point, the logic of output discipline could break down altogether, and the market could shift into a battle for volumes. That is how the most brutal price wars usually begin: every producer pumps more to avoid losing ground, and the pressure on prices becomes far heavier than the market initially expects.

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