Bank of America Raises 2026 Brent Crude Price Forecast Due to Strait of Hormuz Disruption

Investing.com - Bank of America has raised its forecast for Brent crude oil prices in 2026 due to disruptions in the Strait of Hormuz leading to tighter global supplies and accelerated inventory drawdowns.

The bank now expects the average price of Brent crude in 2026 to be $77.50 per barrel, up from the previous estimate of $61, reflecting the increasing impact of conflicts on global oil flows. The new outlook incorporates multiple potential scenarios, depending on the duration of the disruption.

As of press time, Brent crude trading price is $103.

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This forecast assumes two equally likely scenarios. In one case, oil flows return to normal in April, with Brent crude averaging around $70.

In the second scenario, the conflict persists into the second quarter, with an average price approaching $85. The bank considers a less likely extreme scenario where, if the disruption continues into the second half of the year, Brent crude could reach about $130 per barrel.

Analysts led by Kalei Akamine wrote: “When the war ends, the team expects the oil market to recover to oversupply, pushing Brent crude back down to $65 in 2027—assuming no ongoing supply losses.”

The disruption has already had a measurable impact on global oil supplies. Typically, about 20 million barrels of crude oil and refined products pass through the Strait of Hormuz daily, a critical chokepoint in global energy trade.

Bank of America states: “Transport through the strait nearly stopped completely two weeks ago,” adding that alternative pipeline routes to the Red Sea cannot compensate for the lost supply.

As a result, nearly 200 million barrels of oil have been removed from the global market, erasing about half of last year’s inventory growth of approximately 400 million barrels.

With inventories declining and supplies constrained, Bank of America says the disruption is strengthening the oil fundamentals and boosting long-term price outlooks. Analysts wrote: “With no signs of an end to the war, oil inventories are being depleted, reinforcing the post-war fundamentals,” and noted that the long-term Brent crude price range is around $70 per barrel.

Reflecting a stronger pricing environment, Bank of America also raised its cyclical oil assumption from $65 to $70 per barrel, bringing it closer to the bank’s long-term commodity price range of $60-$80.

The higher oil price outlook also boosts valuations for the US exploration and production sector, with Bank of America raising the average target price for oil-related E&P companies by about 17%.

Within this sector, analysts continue to favor large producers like Diamondback Energy, while highlighting mid-sized stocks Devon Energy and Ovintiv as attractive opportunities for valuation re-rating.

Bank of America also reaffirmed its buy rating for California Resources, citing its capital-efficient 2026 plan and potential moderate growth in its 2027 sustainable plan.

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