UBS has lowered its Brent crude oil price forecasts after oil markets retreated sharply following the easing of tensions surrounding Iran and the reopening of shipping routes through the Strait of Hormuz.
The bank now expects Brent crude to reach $85 per barrel by the end of September and December 2026, down from its previous forecasts of $105 and $95, respectively.
Updated UBS Brent Forecasts
| Period | Previous Forecast | New Forecast |
|---|---|---|
| End-September 2026 | $105 | $85 |
| End-December 2026 | $95 | $85 |
| End-March 2027 | — | $80 |
| End-June 2027 | — | $80 |
Front-month Brent crude futures were trading near $72 per barrel, returning to levels seen before the conflict involving Iran intensified.
Strait of Hormuz Reopens
An interim agreement that helped end the U.S.-Israeli conflict involving Iran has allowed tanker traffic through the Strait of Hormuz to recover.
The Strait of Hormuz is one of the world's most important oil shipping routes, carrying a significant portion of global crude exports.
According to U.S. Energy Secretary Chris Wright, shipping flows through the waterway have nearly returned to pre-conflict levels after months of disruptions.
UBS Still Sees Upside Risks
Despite lowering its forecasts, UBS does not expect oil production to recover as quickly as current market prices suggest.
The bank said:
"We continue to expect the production recovery process to be slower than the market expects, leading to higher prices than current levels."
This indicates that UBS believes oil prices may eventually rebound if supply normalization proves slower than anticipated.
Demand Concerns Also Weigh on Oil
Beyond improving supply conditions, investors have become increasingly concerned about weakening global demand.
Earlier this week, JPMorgan also reduced its Brent price outlook for the second half of 2026, citing:
- Softer-than-expected oil demand.
- Smaller declines in OECD inventories.
- Slower consumption growth.
These factors have contributed to the recent decline in oil prices.
Market Implications
Lower oil prices could provide several benefits for the global economy:
- Reduced inflation pressures.
- Lower fuel costs for consumers.
- Improved margins for airlines and transportation companies.
- Reduced energy import costs for countries such as India, Japan, and much of Europe.
However, energy producers and oil-exporting nations could face pressure if crude prices remain near current levels.
While oil markets have largely priced out the geopolitical risk premium that emerged during the Middle East conflict, uncertainty surrounding supply recovery and global demand trends is likely to keep volatility elevated in the months ahead.
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