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European Oil Markets
23JUL

Brent falls below its pre-war level

3 min read
19:27UTC

Brent crude fell more than 4% to a $72.64-$73.72 range on 25 June, dropping under its pre-war February level and erasing the war premium that had pushed it past $116 at the height of the IRGC closure.

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Key takeaway

Oil has declared the war over at $72-73, but the minefield and the underwriters have not.

Brent Crude fell to a range of $72.64 to $73.72 on Thursday 25 June, down more than four per cent in a single session and below its pre-war February level 1. Brent is the global oil benchmark that sets the price of roughly two-thirds of internationally traded crude, so its level feeds directly into petrol, diesel and inflation worldwide. The war premium that pushed it past $116 at the height of the IRGC closure is now entirely gone.

The fall extends a steady reversal. Brent traded at $76.14 only the day before , and held near $80.59 while Iran's Islamic Revolutionary Guard Corps (IRGC) still enforced its Hormuz closure . Traders have now priced the benchmark below where it sat before the 28 February strikes, on the same morning the IRGC rejected the Oman corridor and ordered vessels onto Channel 16.

The market is pricing a normalisation the water has not delivered. Mines remain uncleared and need 40 to 50 days of minimum sweeping, foreign-flag commercial flow runs at a fraction of the pre-war 94 transits a day, and no Protection and Indemnity club has reinstated war-risk cover. Traders are treating the corps's threats as bluff and the Korean sailings as the true signal. Because the premium is fully priced out, a single mine strike or one boarding would reprice the entire curve with no buffer to absorb it.

Deep Analysis

In plain English

Oil's global price is set by traders in markets like London, who buy and sell contracts based on what they expect the situation to be in the future. On Thursday, those traders decided the Iran crisis was effectively over and sold their 'war premium', the extra they had been charging because of the danger, pushing the price of oil below where it was before the war started. On the water, nothing has changed. Mines seeded by the IRGC in June remain uncleared. Shipping insurers still will not cover ships crossing the strait. And Iran's military declared that same morning that it would not accept the new safety route. Oil traders are betting everything will be fine; the mines and the insurers are not.

Deep Analysis
Root Causes

Futures markets price the expected outcome of a geopolitical resolution, not the physical state of the supply chain on the day of trading. The Korean transits and the diplomatic language of both Oman and the GCC signalled to algorithmic trading systems that the closure was ending, producing a cascade sell-off of the war premium regardless of whether ships could actually transit with cover.

Chinese buyers received Iranian crude throughout the conflict via the shadow fleet, suppressing the actual supply shortfall below the headline numbers implied by a closed Hormuz. With GL X now authorising Iranian oil sales through 21 August , the partial legalisation of those flows removed residual uncertainty about Chinese purchasing volumes, accelerating the premium sell-off.

A price floor no longer exists: because the premium is fully priced out, a single mine incident or IRGC boarding would reprice from zero premium rather than from a cushioned level. Spot price carries none of the tail-risk cost that physical insurance markets are still pricing at 20 times pre-war rates.

What could happen next?
  • Risk

    Brent with zero war premium has no downside cushion: a single mine strike or IRGC boarding would produce a larger proportional price spike than any event during the conflict, because traders would be repricing from a fully discounted base.

  • Consequence

    Gulf producer state budgets, sized for $80-90 Brent, move into deficit at sustained $72-73, pressuring Saudi Arabia in particular to push OPEC+ for production cuts that would reverse the price decline and contradict their diplomatic stance on Hormuz normalisation.

Sources:Gulf News
Mentions:Brent Crude →Strait of Hormuz →Gulf News →Beijing →London →Islamabad →Gulf War →Iran →Islamic Revolutionary Guard Corps (IRGC) →Oxford Economics →Cambridge →Iraq →Saudi Arabia →China →Kuwait →Oman →VHF Channel 16 →
First Reported In

Update #138 · Three flags over Hormuz, none enforced

Gulf News· 25 Jun 2026
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Causes and effects
Caused by
Trump orders a DOJ oil-gouging probe
Brent fell from $76.14 on 24 June (ID:4468) to $72.64-$73.72 on 25 June, erasing the war premium across two sessions.
Occurred 24 Jun 2026
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Brent shrugs off the IRGC closure
Brent at $80.59 during the IRGC closure has now fully reversed to below pre-war levels as markets price the threat as bluff.
Occurred 20 Jun 2026
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IRGC rejects the Oman Hormuz route
Markets priced Brent below the war premium on the same morning the IRGC rejected the Oman corridor, treating the corps's mandate as unenforceable.
Occurred 25 Jun 2026
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This Event
Brent falls below its pre-war level
The oil market has priced the Iran conflict as over while the strait stays mined, uninsured and contested, leaving no cushion against a reversal.
Led to
Brent falls straight through the strikes
Brent's $71.99 settle on 26 June continued the war-premium erasure from $72.64-$73.72 on 25 June, falling further through the kinetic exchange.
Occurred 26 Jun 2026
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Different Perspectives
US money managers (CFTC-tracked)
US money managers (CFTC-tracked)
US money managers had trimmed WTI net long positioning into July's rally, doubting the Hormuz premium would hold without freight or war-risk confirmation, and the crude stock build reported for the week to 17 July gives that scepticism a fundamentals basis. The 25 July CFTC data will show whether Brent's move above $100 changed their calculus.
Asian distillate buyers (Singapore)
Asian distillate buyers (Singapore)
Singapore's distillate holders kept retaining middle-distillate barrels as the East-West arbitrage window narrowed further this week, a pattern that sharpened as Fujairah light distillates hit a record low. Cargoes are being held rather than released west into the tightening Mediterranean market.
Bulgaria
Bulgaria
Bulgaria secured the removal of Lukoil founder Vagit Alekperov and Patriarch Kirill from the 21st package, with President Rumen Radev calling a personal listing 'shooting ourselves in the foot'. Sofia is protecting its position in Lukoil's EUR 3bn compensation claim over the 2023 Neftohim Burgas nationalisation.
Russia
Russia
Russia loses the roughly $14 a barrel of legal headroom the price-cap formula would have released toward $58, even as Urals continues trading below Moscow's $59 budget floor. The shadow-fleet insurance workaround that lets sanctioned crude clear above $44 in practice remains untouched by the freeze itself.
European Union
European Union
The EU adopted its 21st sanctions package on 23 July, freezing the $44 Russia oil cap for 12 months rather than letting the formula drift it toward $58, and listed shadow-fleet support vessels for the first time. The package cleared only after three failed Coreper votes.
Marine war-risk underwriters (Lloyd's-linked syndicates)
Marine war-risk underwriters (Lloyd's-linked syndicates)
War-risk syndicates lifted southern Red Sea hull premiums 150% to about 0.75% of hull value after the 20 July blockade declaration, still a seventh of the roughly 5% Hormuz band. Underwriters reset on realised loss, not declared threat, so the 23 July Encelia and Layla strikes set up the next re-mark.