Thesis: Brent crude has corrected 47% from its April high of $138/bbl as markets price the reopening of the Strait of Hormuz, but the selloff has overshot near-term fundamentals. Three reinforcing forces drive the decline: accelerating Hormuz transit resumption (Doha talks June 29-30), demand destruction (-1.1 mb/d per EIA/IEA), and OPEC+'s shift toward market share recovery. Yet OECD inventories drain at 3-4 mb/d and are projected to reach their lowest since 2003 by year-end. The market prices a smooth reopening that the execution risk does not warrant - demining, insurance, and Iranian nuclear negotiations remain unresolved. For crude buyers, the risk-reward favors DEFENSIVE positioning. Near-term downside to $65-70/bbl remains plausible on smooth reopening, but a 25% tail risk of Hormuz re-escalation could spike Brent back above $100 in days. Best course: lock medium-term supply at current levels with tactical puts at $70; avoid over-committing on long-dated contracts given bearish 2027 outlook.
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