UBS Raises 2026 Brent Forecast on Mideast Tensions

Forecast Revision Summary

UBS has increased its average Brent crude oil price forecasts for the first quarter and the full year of 2026. The revision reflects growing geopolitical risks impacting global energy supply routes.

Situational Overview

The adjustment is primarily driven by escalating conflict in the Middle East and the near de facto closure of the Strait of Hormuz, a critical chokepoint for oil shipments. The bank now projects the average Brent price to be $71 per barrel in the first quarter and has raised its full-year 2026 forecast by $10 to $72 per barrel.

Economic and Market Impact

UBS outlines scenarios where prices could surge significantly. Strikes on regional energy infrastructure could push Brent above $90 per barrel, while a prolonged closure of the Strait of Hormuz could drive prices past the $100 mark. Although a de-escalation could ease some risk premium, the bank stated that prices are unlikely to fall back to the $60 level seen at the start of the year.

Conclusion

While forecasts for 2027 and 2028 remain unchanged at $70 and $75 respectively, UBS acknowledges that the balance of risk is skewed to the upside. Market participants will continue to monitor geopolitical developments in the Middle East closely as a key determinant of future price movements.

FAQ

Q: What is the new UBS forecast for Brent in 2026?
A: The new forecast is an average of $72 per barrel, a $10 increase from the previous estimate.

Q: What are the main reasons for this forecast increase?
A: The primary drivers are the escalating conflict in the Middle East and severe disruptions to the Strait of Hormuz.

Source: Investing.com