When Will Crude Oil Prices Stabilize?

I asked how low crude oil’s price can go in a June 30, 2026, Barchart article, where I concluded with the following:

Significant changes in oil market dynamics and the U.S. desire to push inflation lower could send prices to lower lows in the $40-$50 per barrel range. The long-term chart highlights lower highs since 2008, and the current price action suggests oil will likely continue to make lower lows. 

However, if Iran does not cooperate and hostilities accelerate, short-term upside spikes remain possible. The bottom line is that crude oil is likely to move lower from the current price level in the current environment. 

The nearby crude oil benchmarks were lower on June 29, 2026, with NYMEX WTI futures at $70.35 per barrel and ICE Brent futures at $72.81 per barrel. Prices were over $10 per barrel higher in late August, as Iran and the U.S. have traded negotiations and attacks, and the Strait of Hormuz remains mostly closed to oil deliveries from the region. 

Oil remains the energy commodity that powers the world. Therefore, inflationary pressures and interest rates depend on the path of least resistance of crude oil and oil product prices over the coming weeks and months.

A volatile period for crude oil continues

Nearby NYMEX WTI crude oil futures ended 2025 at $57.42 per barrel. The price began climbing after reaching a 2026 low of $55.76 on January 7, and exploded to nearly $120 per barrel on March 9. 

The daily continuous NYMEX futures contract shows that prices made lower highs and lower lows after the March 9 peak, driven by the U.S. and Israeli attacks on Iran. The on-again-off-again conflict that closed the Strait of Hormuz, a critical passage for Middle Eastern crude oil, and negotiations between Tehran and Washington, DC, through intermediaries, have caused price volatility. The continuous contract fell 43.9% from the March 9 high of $119.48 to the July 2 low of $67.04 per barrel. 

As tensions between the U.S. and Iran escalated with periodic Iranian attacks and retaliatory strikes against neighboring countries hosting U.S. military infrastructure, WTI crude oil futures rose 39.5% to $93.50 on July 23, before falling back below $80 as the sides continued to seek a diplomatic solution.  At around $81.75 per barrel in late August 2026, the U.S. administration is giving diplomacy and severe economic sanctions a chance to succeed. Meanwhile, the IRGC has apparently viewed U.S. patience as weakness, as conflicting signals from Iran threaten any chance for a peaceful solution. 

The U.S. wants a deal before the midterm elections

Gasoline prices are critical for U.S. consumers, as the fuel is a staple and contributes to inflationary pressures. Moreover, diesel fuel for trucks impacts the cost of bringing goods to market. 

The continuous contract NYMEX gasoline futures chart shows a 119.5% increase from $1.7150 at the end of 2025 to a high of $3.7640 per gallon wholesale on May 4. Gasoline prices fell 26.8% to $2.7565 on June 25 before rising 21.9% to $3.3600 per gallon on July 23. At below $3 in late August, gasoline futures are closer to the June 25 low than the July 23 high. Gasoline is a seasonal fuel. Prices tend to peak during the summer driving season and decline as fall and winter approach. 

NYMEX heating oil prices serve as a proxy for other distillates, including diesel and jet fuel. 

The continuous contract NYMEX heating oil futures chart shows a 117.4% increase from $2.1215 at the end of 2025 to a high of $4.6130 per gallon wholesale on April 2. Brent crude oil, the benchmark for Middle Eastern petroleum because of its slightly higher sulfur content, is the primary driver of distillate fuel prices. Heating oil futures fell 34.9% to $3.0013 on June 18 before rising 42.9% to $4.2888 per gallon on July 23. At above $4.15 in late August, the distillate futures are closer to the July 23 high than the June 18 low. Distillates are not seasonal fuels, as they experience year-round demand. 

Since consumers are highly sensitive to oil products rather than crude oil prices, the high levels are a significant issue for the administration heading into the November 2026 U.S. midterm elections. With slim majorities in Congress and the Senate, a shift in majorities for the second half of the current administration will impact its policy initiatives, including the ongoing hostilities between Washington and Tehran. Therefore, a peaceful or military solution that ends the conflict is critical for the administration before the November election. 

Iran’s strategy is to stall

The Islamic revolution that deposed the Shah of Iran in 1979 has caused hostility between the U.S. and Iran for 47 years. Past administrations have attempted to curb Iran’s ambitions to dominate the Middle East. Still, while the theocracy has periodically engaged in negotiations, the Iranian strategy has been stalling and ignoring U.S. and its allies’ demands about nuclear weapons research and production. The current administration has told Iran and the world it has two red lines: no nuclear enrichment and weapons, and an open Strait of Hormuz that allows sea traffic to travel unimpeded. Over the past months, agreement to U.S. demands has been on-again, off-again, with conflicting signals and statements coming out of Tehran. It appears that the Iranian leadership and the IRGC continue to stall, waiting for U.S. policy to change after the November midterm elections. Moreover, the IRGC views the administration’s desire for a peaceful agreement as weakness. Stalling has worked for Iran for 47 years, and the leadership has continued to use the strategy in recent months to buy time. 

The bullish case

The bullish case for crude oil includes the following:

• Iranian attacks on U.S. military assets in the Middle East and neighboring countries’ refining and production infrastructures could drive crude oil prices higher.
• Continued closure of the Strait of Hormuz and the Houthis’ attacks on Saudi Arabia and on the Bab el-Mandeb Strait could prevent more Middle Eastern crude oil from traveling to worldwide consumers, pushing the price higher.
• U.S. attacks that destroy Iranian infrastructure could unleash terrorist attacks in the Middle East and abroad, pushing crude oil prices higher.  The U.S. administration’s patience is wearing thin in late August 2026.
• U.S. withdrawal from the region, which would create a victory for the IRGC, could lead to punitive policies that restrict logistical routes, raising oil and oil product prices.
• Russia is an Iranian ally. Higher oil prices increase Russian oil revenues, which are critical for funding its ongoing war with Ukraine. 

In late August 2026, many factors could push crude oil and oil product prices higher as the outcome of the ongoing conflict remains highly uncertain. 

The bearish case

The bearish case for crude oil includes the following:

• A negotiated settlement that opens the Strait of Hormuz to free-flowing traffic and removes threats to the Bab el-Mandeb Strait would likely send crude oil and oil product prices significantly lower.
• Regime change in Iran to a government friendly to the U.S., the Middle East, and other countries would put downward pressure on crude oil and product prices.
• The U.S. is energy independent, which reduces the supply impact of Middle Eastern crude oil.
• The UAE’s departure from OPEC likely reduces the international oil cartel’s pricing power.
• U.S.-Venezuelan cooperation is likely to increase oil production, as Venezuela is home to the world’s largest petroleum reserves.
• Gasoline is the most ubiquitous oil product. Gasoline demand is seasonal and will decline during fall and winter as consumers put fewer miles on their vehicles. 

In late August 2026, considerable bullish and bearish factors are pulling crude oil and oil product prices in opposite directions. Prices are unlikely to stabilize until the U.S. and Iran reach a resolution. Expect continued two-way price volatility in crude oil, gasoline, and distillates as Iran continues to stall, the U.S. exhausts diplomatic options, and the U.S. President’s patience wears thin. I do not expect prices to stabilize in 2026. Markets across all asset classes reflect crude oil price action, which is likely to continue over the coming weeks and months.