UBS analysts have increased their near-term oil price forecasts, citing an escalating conflict in the Middle East and the extended closure of the Strait of Hormuz.
The analysts now expect Brent crude to average $86 per barrel in 2026, up $14 from prior estimates, and $80 per barrel in 2027, up $10. The revised outlook assumes the conflict continues for another two to three weeks into early April and that flows through the Strait of Hormuz remain severely reduced.
Under this scenario, oil prices could briefly exceed $120 per barrel before easing as flows gradually resume. The analysts assume no damage to major oil fields or export terminals and expect partial normalization of shipments beginning in April, with Brent averaging around $100 per barrel in the second quarter of 2026.
They added that a higher risk premium and the need to rebuild inventories are expected to keep prices elevated through 2027, while leaving long-term forecasts unchanged at $75 per barrel from 2028 onward.
UBS noted that West Texas Intermediate prices were not raised as much as Brent, citing the current spread as well as a planned release from the US Strategic Petroleum Reserve and concerns about a potential US export ban.
The duration and severity of disruptions through the Strait of Hormuz remain central to the outlook. UBS estimates that about 5 million barrels per day have been redirected out of more than 20 million barrels per day that typically pass through the waterway, leaving a shortfall of roughly 13 million barrels per day, even as Iranian exports continue.
At that rate, global oil inventories could return to average levels by the end of March and approach low levels by the end of April, the analysts wrote.
“We note uncertainty around both the point at which the US would stop operations against Iran and how quickly would Iran let tankers through,” they added.
The report outlines a range of possible scenarios depending on how the situation evolves. If disruptions persist beyond early April, UBS said supply challenges could intensify, particularly in Asia, and oil prices could rise above $150 per barrel.
In comparison, a near-term de-escalation could reduce the risk premium, though prices would likely stabilize in the $70 per barrel range rather. “It would likely not be all the way to the $60/bbl level we started the year at but rather in the $70s,” the analysts noted.