Oil prices have come off the extreme highs seen during the early phase of the Iran-US conflict, but it would be a mistake to read this as a return to normal. The market has stepped back from panic, not from risk. What has changed is sentiment. What has not fully changed is the underlying supply picture.
At the peak of the crisis in early March, Brent briefly crossed $120 per barrel as fears grew that disruption in the Strait of Hormuz could drag on. That was enough to trigger classic panic pricing. Oil markets do not wait for shortages to fully appear; they react to the possibility that supply could be hit. Once diplomatic signals began to emerge and Iran-US negotiations started, that extreme fear started to unwind. Brent fell back into the mid-$90 range, while WTI moved into the low $90s. The correction was sharp, but it was driven mainly by the market pricing out the worst-case scenario, not by a full restoration of normal supply conditions.
That distinction matters. Markets are forward-looking, and in oil the expectations story is often as important as the physical one. Right now, the expectations story has improved faster than the supply story. Shipping constraints in the Gulf have only partly eased. Tanker insurance remains elevated. Cargo movement still faces friction. In other words, futures markets have calmed, but the physical market has not fully healed.
This is why prices are unlikely to fall much further. The geopolitical premium has narrowed, but it has not disappeared. Iran and the United States may be talking, but the structural tensions remain. Markets know that one failed round of talks, one flare-up in the Gulf, or one new disruption to shipping can quickly put the risk premium back into crude. Supply chains also do not normalize overnight. Even if diplomacy holds, it takes time for freight costs, insurance premia, and inventory behaviour to settle.
The most likely path from here is not a smooth decline. It is volatility within a broad range. If negotiations continue and physical flows through the Gulf improve meaningfully, Brent could drift toward $85-90 over the coming months. But that would require more than reassuring headlines but visible normalization in actual supply conditions. If talks stall or tensions re-escalate, prices can just as easily move back into the $105-115 range, with spikes beyond that if supply losses become serious. For now, the middle ground remains the base case: crude trading around $90-100, below the panic highs but still too high to suggest comfort.
That is why the recent correction should be treated with caution. The worst of the immediate panic has passed, but the relief is only partial for oil importing countries. For Pakistan, prices remain high enough to keep pressure on inflation, trade balances, and monetary policy.
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