After nearly four months of military conflict that ripped a hole in global energy supply, the US and Iran are set to sign a 60-day interim peace deal on Friday in Switzerland. The International Energy Agency has been tracking the fallout since the war began, and the numbers tell a brutal story: global oil supply in 2026 is projected to fall by approximately 3.9 million barrels per day on average, a deficit so severe it overwhelmed demand forecasts through at least the third quarter of the year.

Now, with diplomats preparing ink for paper, markets are exhaling. Brent crude dropped roughly 4% to around $84 per barrel after the peace deal was announced, a steep slide from the near-$120 highs that defined the peak of the crisis. That’s a swing of about $36 per barrel in a matter of months.

How the war reshaped global oil supply

The conflict traces back to February 28, 2026, when joint US-Israel air strikes on Iran triggered a cascade of supply disruptions across the Persian Gulf. The most consequential impact was the closure of the Strait of Hormuz, the narrow waterway responsible for transporting approximately 20% of the world’s oil.

Production losses came primarily from Gulf producers caught in the blast radius of the conflict. The IEA’s projections captured the scale of the damage: a 3.9 million bpd average supply decline for the full year. The IEA’s May 2026 Oil Market Report reflected these conflict-driven dynamics, painting a picture of persistent supply deficits through at least the third quarter of 2026.

What the peace deal actually covers

The interim framework agreement was announced around June 14-15, 2026, with the formal signing ceremony scheduled for June 19 in Switzerland. The deal’s core objective is straightforward: halt hostilities and allow for the resumption of oil transit through the Strait of Hormuz. The 60-day window is designed as a confidence-building period, not a permanent settlement.

The IEA’s upcoming June 2026 Oil Market Report is expected to integrate these developments and forecast post-deal dynamics in oil supply and pricing.

What this means for investors

The 4% drop in Brent crude to around $84 per barrel represents the market’s initial pricing of peace. That price still sits well above where oil traded before the conflict began. Uncertainties surrounding Iran’s nuclear program remain unresolved, and the broader geopolitical dynamics that led to the February strikes haven’t disappeared.

The critical variable to watch is the IEA’s June Oil Market Report. If the IEA signals that supply deficits could narrow meaningfully in the second half of 2026, expect another leg down in crude prices. The spread between $84 and $120 represents tens of billions of dollars in global economic activity.