Nigeria’s benchmark crude slumps 33% as traders bet the war is over

Brent crude, the global benchmark that sets the price for Nigeria’s flagship Bonny Light export grade, has shed more than a third of its value over the past month, sliding to its lowest level since March as traders conclude that the Middle East conflict driving this year’s oil rally is winding down.

The international benchmark stood at $78.24 a barrel as of 08:00 GMT, the lowest price since March 3, extending a slide that has wiped out virtually all of the premium built up since tensions between the United States and Iran escalated earlier in 2026.

Brent is now down more than 33 percent over the past month, while WTI has plunged to the mid-$70s. A market that spent the spring obsessing over missing barrels is now worried about just how quickly those barrels might come back.

“The immediate prognosis, it seems, is optimistic and assumes no significant setbacks,” Tamas Varga, an analyst at PVM Oil Associates in London, said in a commentary.

“Over the last four trading sessions, Brent, for example, has fallen by $17 [per barrel], a discernible vote of confidence that the worst, at least as far as supply disruptions are concerned, is behind us,” Varga said.

Vandana Hari, the founder of the Singapore-based oil market analysis provider Vanda Insights, said that while the announcement of the US and Iran’s memorandum of understanding (MoU) has brought relief to markets, the “hardest part, on delivering the pledges and promises, is yet to come”.

“Crude’s slide is entirely sentiment-driven,” Hari told Al Jazeera.

“The market is front-running the prospective reopening of the Strait of Hormuz and likely pricing in the best-case scenario for the normalisation of flows, which means the potential hiccups from logistics to renewed geopolitical tensions are not being adequately factored in,” Hari said.

While many details of the MoU due to be signed on Friday remain unclear, Iran is expected to end its near-total closure of the Strait of Hormuz in exchange for the US lifting its blockade of Iranian ports, among other concessions.

The full reopening of the strait would be a crucial step towards restoring confidence in energy supply chains, after nearly four months of turmoil arising from the war.

Maritime traffic in the strait, which flows between Iran and Oman, has been reduced to a trickle due to the threat of Iranian missiles, drones and mines, reducing the global oil supply by an estimated 14 million barrels each day.

Even if the war does end, global energy flows are expected to take months to fully recover.

More than 500 vessels are estimated to be waiting to exit the Gulf through the strait, while the process of ensuring the channel is free of naval mines is likely to take weeks at a minimum.

Stephen Cotton, the general-secretary of the International Transport Workers’ Federation, said the signing ceremony scheduled to take place in Geneva, Switzerland, would be “at best the beginning” of a process of normalisation.

“The backlog of stranded vessels and the need for crew changes and rest mean a realistic return to normal shipping patterns is weeks, if not months, away,” Cotton said in a statement on Monday.

Implications for Nigeria

For Nigeria, the swing is more than an abstract market headline. Bonny Light and other Nigerian grades are priced as a differential to Brent, meaning every dollar Brent loses flows almost directly into the price Nigeria’s crude actually fetches on the water.

Bonny Light, which traded north of $130 a barrel in early spring as tankers avoided the Gulf and insurers repriced shipping risk, has come down sharply alongside the global benchmark in recent weeks.

Nigeria’s 2026 federal budget was built on a crude price assumption of roughly $65 a barrel and an exchange rate near N1,400 to the dollar, a benchmark that looked conservative when Bonny Light was trading at double that figure during the worst of the Strait of Hormuz scare.

With Brent now drifting back toward and potentially below that budget assumption, the windfall that briefly cushioned government revenue, the naira, and external reserves is evaporating just as quickly as it appeared.

The fiscal mechanics matter because Nigeria still leans heavily on crude receipts to fund federal and state spending through the FAAC allocation system. Every $10 swing in the price of oil shifts gross government revenue by billions of dollars a year at Nigeria’s roughly 1.4 million to 1.8 million barrel-a-day production levels — a relationship that cuts both ways.

Analysts at local investment firms had flagged in recent months that a sustained Hormuz-driven price spike would strengthen FAAC distributions, support external reserves, and ease pressure on the naira, provided production volumes held up. The current reversal raises the opposite risk: a faster-than-expected return of Iranian barrels to the market could pull prices down further, narrowing the cushion just as the central bank works to keep the naira stable.

There’s a complicating wrinkle specific to Nigeria’s position as both an exporter and an importer. Despite pumping crude, Nigeria still imports a meaningful share of the refined petrol it consumes, even with the Dangote refinery now covering a majority of domestic fuel needs.

That means a falling Brent price is not unambiguously good or bad for the country: cheaper crude lowers the cost of refined product imports and could ease pump prices and inflation, even as it shrinks the dollar revenue the government collects from crude sales themselves.