• Major banks have raised their oil price forecasts for 2026 and 2027, citing ongoing supply disruptions from the Middle East conflict and attacks on energy infrastructure.
  • The upward revisions, led by a $4.56 increase in Q4 2026 Brent to $94.78 per barrel, reflect a tight near-term market despite weakening demand.
  • While forecasts still show prices easing in 2027, that outlook is highly conditional on a sustained recovery in Gulf exports and secure shipping routes.

Banks Lift Forecasts on Supply Tightness

Major banks have raised their oil price forecasts for 2026 and 2027, according to a Wall Street Journal (NWSA) survey, as continued disruptions to Middle Eastern supply keep near-term markets tight. The revisions, while moderate for full-year averages, point to a growing consensus that elevated prices will persist through late 2026 before any meaningful relief.

For full-year 2026, Brent is now seen averaging $90.40 per barrel, up $2.27 from the previous survey, while West Texas Intermediate (WTI) is forecast at $84.38, an increase of $1.40. The largest adjustment came in the fourth-quarter 2026 Brent projection, which jumped $4.56 to $94.78. WTI for the same period rose $2.63 to $88.10.

“The revisions are not about stronger demand—they’re about supply that is being choked off by conflict and infrastructure damage,” said one analyst familiar with the survey, who spoke on condition of anonymity. “The market is pricing in a risk premium that could stay elevated for months.”

The 2027 forecasts were also raised, though more modestly: full-year Brent is now expected at $76.74 (up $1.99), and WTI at $70.52 (up $0.66). For the first quarter of 2027, Brent rose $1.19 to $84.63, while WTI slipped $0.17 to $79.71, the only downward revision in the set.

Supply Disruptions Drive the Shift

Behind the higher forecasts lies a deepening supply shock. The US-Israeli war with Iran, which began in late February, has effectively closed the Strait of Hormuz, a critical chokepoint for global oil flows. Attacks on tankers and energy infrastructure have compounded the disruption, and on October 30, reports of a fresh attack in the strait underscored the fragility of the situation.

The International Energy Agency (IEA) paints a stark picture: global oil demand is forecast to decline by 2.6 million barrels per day (bpd) in 2026, to 102.4 million bpd, while supply averages only 100.7 million bpd. That leaves a deficit through year-end, with middle-distillate supplies—such as diesel—expected to remain constrained well into 2027.

“Fuel prices are soaring while availability is restricted, and that is feeding through to weaker consumption and a darker economic outlook,” the IEA said in its October report. The agency also noted that record tanker rates have increased crude delivery costs and eroded refinery margins, creating a double squeeze for refiners.

Market Prices Reflect Risk Premium

Oil prices have surged in recent weeks, with Brent trading at $115.74 and WTI at $102.72 in early trading on October 30, according to Reuters (TRI). Both benchmarks were on track for a fourth consecutive monthly gain, though they pared some gains later in the session on hopes of a diplomatic breakthrough.

“The market is hyper-sensitive to headlines,” said a trader at a European energy firm. “Any hint of peace talks and you see a $5 drop, but the underlying tightness remains.”

US inventory data released this week offered mixed signals: crude stocks fell 1.9 million barrels in the week ended October 23, while gasoline stocks rose 3.9 million barrels, suggesting some demand destruction is starting to weigh on product markets.

Outlook Hinges on Gulf Recovery

The banks’ forecasts assume that supply will gradually recover in 2027, with the IEA projecting a 7.7 million bpd increase in global supply and a smaller demand recovery of about 2 million bpd. That would allow prices to moderate from current levels.

But the timing and scale of that recovery are far from certain. Reuters’ latest survey of 32 analysts, which showed a smaller upward revision than the WSJ poll, projected a surplus of just 290,000 bpd in 2027 if Gulf flows improve. Meanwhile, industry executives warn that shipping constraints, refinery damage, and the need to replenish depleted inventories could keep markets stressed for longer.

Saudi Aramco (2222.SR) CEO Amin Nasser said this week that refilling global inventories while meeting demand could take up to two years. “We are drawing down stocks at an unsustainable rate,” he said at an industry conference. “The rebuild will be slow and costly.”

ANZ (ANZ.AX) and UBS (UBS) have both raised their year-end Brent targets to $105 and $110, respectively, well above the survey averages, while Goldman Sachs (GS) sees Brent at $90 by year-end and averaging $80 in 2027, with risks skewed to the upside. The wide range of forecasts underscores the uncertainty created by the geopolitical situation.

For Consumers and Businesses, Higher Costs Loom

The implications are far-reaching. For consumers, higher fuel costs are already eating into disposable income, while transport-dependent businesses face margin pressure. The IEA noted that soaring fuel prices and restricted availability are contributing to a weaker economic outlook, particularly in oil-importing economies.

India, for instance, has seen its rupee come under pressure as elevated crude prices and foreign-investor outflows weigh on the currency. “The energy bill is a major headwind for our economy,” said a Mumbai-based economist. “Every $10 increase in oil prices adds about $15 billion to our import bill.”

The political context remains volatile. The conflict in the Middle East shows no signs of abating, and analysts in Reuters’ survey generally expect OPEC+ to avoid major near-term policy shifts. “The market is relying on physical flows, not on a production-policy response,” one analyst said.

In the meantime, traders are watching for any signs of escalation or de-escalation. An attack on a tanker in the Strait of Hormuz on October 30 served as a reminder that the situation can deteriorate quickly. “The risk premium is not going away,” said another analyst. “Not until we see a sustained recovery in exports and a rebuild of inventories.”

Correction: An earlier version of this article misstated the change in the Q1 2027 WTI forecast. It was a decrease of $0.17, not an increase.