• UBS (UBS) has raised its year-end Brent crude forecast to $110 a barrel, according to a research note, as supply risks keep oil prices elevated.
  • The forecast implies a modest decline from recent levels, with Brent trading around $115 in early Asian trading on October 27.
  • Tight physical markets and geopolitical tensions continue to underpin prices, though diplomatic efforts may offer some relief.

UBS Lifts Oil Target

UBS has raised its year-end Brent crude forecast to $110 a barrel, according to a research note from the Swiss banking group, as persistent supply disruptions keep energy markets on edge. The new target, if confirmed, would mark an increase from the bank's previous forecast of $100 a barrel issued on October 12. UBS declined to comment on the report when contacted.

The revision comes as Brent crude traded around $115 a barrel in early Asian trading on October 27, easing slightly on hopes for diplomatic progress but remaining near six-month highs. A $110 year-end forecast would imply some decline from current levels, suggesting UBS expects a gradual normalization of supply conditions rather than an immediate return to stability.

Supply Risks Persist

The oil market remains tightly supplied, with attacks on shipping and energy infrastructure, uncertainty around the Strait of Hormuz, and elevated freight costs continuing to support prices. The nearest-contract spread for Brent stood at approximately $5 a barrel on October 26, up from $3.69 a week earlier. This backwardation—where near-term oil costs more than later deliveries—indicates that buyers still place a substantial premium on immediate supply.

Governments have sought to cushion the shock. UBS reported on October 12 that G7 countries had agreed to release 100 million barrels of crude and diesel from emergency reserves, while Gulf exports were showing signs of improvement. Nevertheless, continued attacks have limited the relief.

The economic transmission is straightforward: sustained high oil prices raise fuel and transport costs, squeeze household purchasing power and corporate margins, and complicate inflation control. UBS specifically identifies inflation, bond yields, consumer spending and business margins as channels through which the energy disruption affects the wider economy.

Diplomatic Efforts in Focus

The oil outlook depends heavily on whether diplomacy can produce reliable shipping access. October 27 reporting described talks involving Saudi Arabia, Pakistan, Turkey and Iran over reopening the Strait of Hormuz in exchange for Washington lifting restrictions, as well as a US blockade of Iranian ports. A proposed US-backed energy ceasefire between Russia and Ukraine is another potential source of relief, provided it leads to a durable reduction in attacks on energy infrastructure.

UBS's outlook assumes a gradual recovery in Hormuz traffic, interrupted by periodic setbacks. The bank's forecasts have risen steadily as the disruption has persisted: in March, UBS raised its full-year average Brent forecast to $72; in September, it lifted its year-end target to $95 from $85; and on October 12, it confirmed a further increase to $100.

Other analysts remain more bullish. An October 27 analysis by Mirae Asset Sharekhan maintained a $120 Brent target, arguing that diplomacy-driven price declines could prove short-lived. That is a separate view, not UBS's forecast or a market consensus.

UBS is scheduled to report third-quarter results on October 28. The bank reported second-quarter net profit of $2.8 billion and a common equity tier 1 capital ratio of 14.4%. Its restructuring of Credit Suisse (CS) remains on track for completion by year-end 2026, with cumulative gross cost savings of $12.6 billion.

Correction: An earlier version of this article misstated the previous UBS forecast. It was $100 a barrel, not $95.