Morgan Stanley cuts oil forecast as Strait of Hormuz traffic rebounds faster than expected

Morgan Stanley has cut its oil-price outlook after saying traffic through the Strait of Hormuz is recovering faster than expected, a sign that one of the world’s most important energy chokepoints is normalizing sooner than the market had assumed.

The bank lowered its Brent forecast for the fourth quarter of 2026 to $75 a barrel from $80 and cut its end-2027 forecast to $70 from $80, according to a note reported by MarketWatch on Tuesday. The revision reflects a quicker-than-expected recovery in tanker flows through the narrow waterway between Iran and Oman.

Forecast cut

Morgan Stanley said the improvement in traffic has been strong enough to change its price outlook. The bank’s note, as reported by MarketWatch, said the Strait of Hormuz is reopening faster than expected and that shipping activity has moved back toward the range that was typical before the conflict.

That matters because the strait is a critical passage for oil and gas exports from the Persian Gulf. When transit volumes recover, markets tend to price in less disruption risk, which can ease pressure on crude futures, tanker insurance costs and energy-related equities.

The firm’s new forecast marks a notable shift from its earlier assumptions. Instead of keeping Brent at the prior $80 levels for late 2026 and end-2027, the bank now expects lower prices if the current pace of traffic normalization continues.

Tanker traffic recovers, then slips

Morgan Stanley said 35 outbound oil and gas tankers transited the strait last Thursday, bringing flows back into the 30-to-40 range it said was typical before the conflict. It said five of those vessels were very large crude carriers, capable of exporting about 10 million barrels of crude, and that 15 inbound tankers also resumed transiting, including five VLCCs.

That recovery was not linear. The Wall Street Journal reported that traffic through the strait slowed again over the weekend, with 22 crossings recorded on Sunday and 108 vessels crossing from Friday to Sunday, based on Kpler data.

According to the WSJ account, the slowdown followed attacks on a cargo ship on Thursday and an oil tanker on Saturday. Axios separately said oil shipments through the strait are recovering faster than expected, but that renewed hostilities have added fresh uncertainty.

Taken together, the reports suggest that shipping has improved enough to pressure oil-market forecasts, but not enough to remove the risk of another setback.

Market and shipping stakes

The Strait of Hormuz is one of the world’s most important maritime chokepoints, so small changes in traffic can have outsized effects on crude pricing, shipping risk and energy-market sentiment.

For oil traders, a steadier flow through the waterway reduces the chance of a severe supply shock. For tanker operators and insurers, it can mean lower route risk and fewer costs tied to security concerns. For energy producers and refiners, it affects how much geopolitical risk gets built into forward pricing.

Morgan Stanley’s lower forecast suggests the bank sees less supply disruption than it had previously anticipated. But the same traffic data that supported the downgrade also show how fragile the recovery remains.

Control of the reopening

The shipping rebound is unfolding against a political dispute over who controls the reopening process. The Guardian reported that Iran and Oman are competing over that role, and said Iran has blocked an International Maritime Organization alternative-routing plan after an attack on a Singaporean ship near Oman.

That adds a second layer of uncertainty beyond the immediate security risk. Even if traffic volumes keep improving, the route remains subject to bargaining over routing, oversight and maritime control.

The broader diplomatic backdrop also matters for how shipping companies and traders interpret the recovery. If negotiations over control of the strait stall, the route could remain vulnerable to renewed disruption even in periods when traffic appears to be normalizing.

What to watch next

Axios said the rebound in oil shipments will also depend on how quickly Persian Gulf producers restore output and on how many empty ships return to the strait to load oil.

Those are practical markers of whether the improvement is becoming durable or just a temporary rebound after a violent week. Another sign to watch will be whether tanker counts stay in the 30-to-40 range or slide again after the weekend slowdown.

Market participants will also be watching for any official statement from Iran, Oman or maritime bodies on route control and reopening terms. If other banks follow Morgan Stanley and lower their oil-price targets, that would signal the market is beginning to assume a more stable shipping environment.

For now, the message from the latest reports is mixed but clear: tanker traffic through the Strait of Hormuz is recovering faster than feared, yet the route still sits under active geopolitical and security risk.