Why oil prices are easing even after recovering from conflict-driven spike

Dubai: Even as geopolitical tensions between Israel and Iran made headlines and briefly rattled energy markets, oil prices have settled into a familiar pattern: drifting lower.

On Tuesday, Brent crude steadied at its lowest level since early June, trading just under $67 a barrel, while WTI hovered near $65. The short-lived price surge seen after the Israel-Iran flare-up has now fully reversed.

According to the latest S&P Global Commodity Insights report, the reason is clear: global oil supply is growing faster than demand, and that’s putting steady downward pressure on prices.

“The fundamentals are the fundamentals – and the oil price trend remains the same: downward,” said Jim Burkhard, Vice President and Global Head of Crude Oil Research at S&P Global. “There is plenty of oil available.”

Despite the recent volatility, oil prices fell nearly 10% last quarter, weighed down by a mix of soft demand and expanding supply. The market briefly surged in June after Israel launched strikes on Iran – but as hostilities eased, so did the price bump.

S&P Global now expects the second half of 2025 to see oil supply exceed demand by 1.2 million barrels per day, followed by another surplus in 2026. That’s a sharp contrast to 2024, when demand growth had the upper hand.

Global oil demand in 2025 is also projected to grow at the slowest pace in over two decades (excluding global crises), at just 870,000 barrels per day.

At the same time, OPEC+ countries are ramping up supply faster than expected. Saudi Arabia, for instance, increased exports by nearly 700,000 barrels per day in June, aligned with its stated targets.

Despite a recent ceasefire, Middle East oil flows remain robust, with more than 4 million barrels per day of untapped capacity still in reserve. And if sanctions ease, Iranian exports could climb further, analysts say.

This weekend, OPEC+ is widely expected to approve another round of output increases, according to a Bloomberg survey, with Saudi Arabia keen to reclaim market share.

“The fear premium from the Iran conflict was temporary. The market has refocused on supply and demand,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Meanwhile, U.S. production is forecast to decline by 600,000 barrels per day between mid-2025 and the end of 2026 – the country’s first year-on-year drop in a decade.

S&P Global expects Brent crude to trade between $50 and $60 per barrel into 2026, with WTI possibly dropping into the upper $40s. That’s despite ongoing geopolitical risks and concerns over trade policies.

“Even with uncertainty and conflict, the fundamentals haven’t changed: there’s more supply than demand,” said Burkhard.

For UAE businesses, traders, and energy watchers, this signals a shift in focus: short-term headlines may shake markets briefly, but long-term trends are still steering oil prices lower.