Overview#
Bank of America (BofA) has updated its forecast for Brent crude oil prices for 2026, citing the ongoing conflict in Iran as a significant factor. The bank warns that this situation has eliminated the global energy surplus, leading to a more uncertain outlook for both supply and pricing.
Key Insights from BofA#
Analyst Francisco Blanch highlighted that BofA's primary scenario, which they call a "regime alteration" regarding Iran, remains the most probable outcome. This follows comments from U.S. President Donald Trump suggesting that military operations could conclude soon. If this occurs, BofA anticipates that energy supplies could return to normal levels by April.
However, the situation is complicated by the recent appointment of Mojtaba Khamenei, which may lead to a more hardline approach in Iran. This has prompted BofA to consider three alternative scenarios where the conflict could extend into the second, third, or even fourth quarter of 2026, each leading to different implications for global oil supply and pricing.
Supply and Price Projections#
Currently, the Strait of Hormuz, a crucial shipping route for oil, remains largely shut, and energy assets are under threat. BofA notes that the scenario where energy flows are disrupted into the second quarter of 2026 is now equally likely as a quick resolution. The bank projects a deficit of 2.2 million barrels per day (b/d) in the first quarter of 2026, with a balanced market expected in the second quarter.
Overall, BofA forecasts a total deficit of 1.1 million b/d in the first half of 2026 before supply levels normalize. Consequently, BofA has raised its Brent crude price forecast to $77.50 per barrel for 2026, predicting an average of $80 in the second quarter. Prices are expected to decline in the latter half of the year, dropping to $65 in 2027 as the pre-war surplus returns. Additionally, West Texas Intermediate (WTI) crude is anticipated to trade at $5 less than Brent.
In more severe scenarios, BofA suggests that Brent prices could average $100, and potentially reach up to $130 if disruptions continue into late 2026.