Analysts raise long-term oil forecasts as Middle East conflict reshapes global supply

Oil markets entered the final days of September 2026 with Brent crude trading near $103 per barrel and analysts at two major commodity research houses raising their long-term price forecasts — not because the Middle East crisis is getting worse, but because they no longer expect it to meaningfully get better anytime soon.

Brent fell 1.5% on Tuesday to $103.72 per barrel and WTI dropped 2.2% to $90.62 per barrel, according to Baystreet.ca, as investors reacted to signs that Middle Eastern crude exports are recovering. Regional exports reached 15.5 million barrels per day in September, surpassing 80% of pre-war levels and marking the highest figure recorded since the conflict erupted seven months ago. Saudi Arabia drove that rebound, with its exports more than doubling — rising from 2.45 million bpd in August to approximately 5.4 million bpd in September — after portions of the damaged East-West pipeline were restored to service.

But the day's pullback obscures a larger story: prices have risen sharply from pre-war levels near $72 per barrel, and the analysts who track this market most closely are now forecasting that elevated prices will persist well into 2027 — and possibly beyond.

Standard Chartered raised its average Brent forecast for 2026 to $92.00 per barrel, up from a prior estimate of $85.50, and lifted its 2027 Brent forecast to $89.50 from $77.50. WTI forecasts were revised upward by similar margins. The bank cited stalled diplomacy, regional escalation beyond Iran and the Strait of Hormuz, and what it described as a more persistent deterioration in the Middle East security environment.

The global energy market is now confronting a more persistent deterioration in the Middle East security environment, with little prospect of a return to the pre-conflict status quo and no real pathway to a settlement visible yet.— Standard Chartered analysts

Commodity data firm Kpler reached a similar conclusion through a different lens. Kpler lifted its 12-month forecast for North Sea Dated crude to $81 per barrel from $73, attributing the change to a single revised assumption: rather than a temporary spike to be traded around, the standoff between the US and Iran now represents the market's baseline operating environment through at least the end of the year.

The mechanics behind Kpler's revision are stark. Partial closure of the Strait of Hormuz has led the firm to lower its Middle Eastern production estimates, flipping its second-half 2026 balance from a projected surplus of 1.5 million barrels per day to a deficit of nearly 2 million bpd. What Kpler had projected would be a comfortably oversupplied market by autumn has instead turned into a shortfall.

Flows through both Hormuz and Bab el-Mandeb are genuinely restricted, and the market keeps handing back the premium anyway.— Kpler analysts

The reason prices have not risen further, Kpler argues, is China. Kpler points to weak domestic demand, compressed refining margins, and already-elevated crude stocks as reasons Chinese refiners are holding back on inventory rebuilding. The firm puts Chinese crude intake at between 12.5 and 12.6 million barrels per day across June and July — a figure 18% below year-ago levels, representing a gap of 2.8 million bpd. That demand shortfall is acting as a ceiling on prices even as supply constraints create a floor.

Crude transit through the Strait of Hormuz has averaged 3.9 million barrels per day since mid-July despite a broken memorandum of understanding, according to Kpler — up sharply from lows of just 195,000 barrels per day in March, but still well below pre-conflict norms. The partial recovery has allowed US crude exports to Asia to fall from 2.5 million bpd in Q2 to 1.4 million bpd in July, as Middle Eastern barrels reclaimed some of their market share.

Standard Chartered frames the deeper shift as one from efficiency to resilience. Energy companies spent years trimming inventories, streamlining supply chains, and pursuing leaner operations. That approach, the bank argues, is now reversing: governments, producers, and consumers are building larger inventories, maintaining more spare capacity, and diversifying suppliers. The shift raises costs across the system — and in doing so, supports a higher long-term floor for oil prices.

Supply buffers are described by Standard Chartered as extremely thin, making prices highly sensitive to further disruption. Even if US-Iran negotiations resume, the bank anticipates a slow and imperfect path toward de-escalation, with recurring flare-ups in tension sustaining a risk premium in prices. It expects oil markets to normalize more slowly than previously anticipated, with elevated prices likely to persist into 2027 and beyond.

The conflict's ripple effects are visible in product markets as well. Standard Chartered reports that diesel prices have hit an all-time high, characterizing what began as a market problem as having crossed into policy territory. The Trump administration is under significant internal pressure to act — particularly from battleground states where high diesel prices coincide with the agricultural harvest season. A diesel export ban has been discussed, but Energy Secretary Chris Wright and others in the cabinet have warned it could tighten gasoline and jet fuel supply, worsen the global product shortage, and ultimately damage Gulf Coast refining economics. Among the options seen as less disruptive, Standard Chartered cites voluntary export reductions by refiners and expanded use of tax-exempt dyed diesel.

In Europe, EU Energy Commissioner Dan Jørgensen has urged member states to sustain stronger gas storage injections and consider demand reduction measures, warning of a potential price crisis. On Tuesday, European natural gas futures slipped to €69.30 per megawatt-hour — their lowest point in a month — pulled down by softer Chinese LNG demand, a signal that markets are less alarmed than Brussels. Standard Chartered notes that existing flexibility to lower the EU storage target to 80% may ease near-term pressure but does not fully remove Europe's exposure heading into winter.

In Kpler's base case, the conflict winds down toward year-end, with a maritime blockade eventually compelling Iran to make significant nuclear concessions in the fourth quarter, after which flows through Hormuz and Bab el-Mandeb gradually return to normal. The firm nonetheless makes clear that the range of possible outcomes is wide, and it has constructed both upside and downside scenarios: in the high case, fresh escalation coincides with a partial return of Chinese buyers, yet subdued Chinese demand and elevated inventories still limit how far prices can climb. The low case assumes a rapid return to pre-conflict conditions and a full reopening of both chokepoints.

What both firms agree on is that the old price regime is gone. The question is no longer when oil returns to $72 — it is how high the new floor settles, and for how long.

Why it matters — Higher oil prices sustained into 2027 would raise costs across the global economy — from diesel for farmers and truckers to jet fuel and heating — while reshaping energy investment and supply-chain strategy for years.

Reported by reuters.com, baystreet.ca, spglobal.com, eia.gov, kpler.com