• Macquarie expects oil market to swing into surplus by year-end if US-Iran tensions ease before the midterms.
  • Restoration of Middle East flows could create oversupply after war-related disruptions.
  • Analysts warn residual risk premia may persist despite potential supply normalization.

Surplus Scenario

Macquarie Group is forecasting a potential oil market surplus by the end of the year if the US and Iran de-escalate the conflict ahead of the midterm elections. The bank's analysts say easing tensions could restore Middle East oil flows within weeks, creating a significant oversupply after war-related disruptions tightened global markets.

"The restoration of flows through the Strait of Hormuz would rapidly unwind the supply deficits we've seen," a Macquarie strategist said. "Without a deal, the market remains precariously tight."

Context and Implications

The view aligns with broader market chatter that a diplomatic breakthrough could reduce risk premia and push prices down from wartime highs. A shift toward oversupply would likely dampen energy-driven inflation, influencing central bank policies and global growth trajectories. However, some analysts caution that volatility could linger. "Even with flows returning, the residual threat of renewed hostilities keeps a floor under prices," a hedge fund manager noted. Macquarie's call comes as other banks adjust forecasts downward for Brent and WTI, though supply-demand balances remain sensitive to OPEC+ decisions and demand resilience.

Political Drivers

The outlook hinges on US-Iran negotiations, which have intensified ahead of the midterms. Diplomats have discussed sanctions relief and security guarantees that could unlock crude flows. "Progress is real, but it's fragile," a person familiar with the matter said. Macquarie's model assumes a best-case scenario where flows resume by the fourth quarter, but failure to reach a deal would keep the market tight.

Prognosis

In the short term, a surplus would pressure prices, offering relief to consumers but squeezing producers. Over the longer term, the balance depends on whether demand holds up and OPEC+ adjusts output. "A sustained peace could fundamentally reshape the market's risk premium," the Macquarie strategist added. Attempts to reach the bank for further comment were unsuccessful.

Correction: An earlier version of this article misstated the timeline for potential surplus. Macquarie's forecast applies to year-end 2026.