A prolonged conflict with Iran could cause Brent crude to spike above $150 a barrel, according to Bank of America. The bank’s prediction comes as it raised its oil price outlook as supply disruptions across the Middle East and Russia tighten global crude and fuel supplies. Bank of America now expects Brent to touch $95 per barrel in the second half of this year, up from a prior forecast of $83 per barrel. But actual prices could skyrocket past that forecast to $150 a barrel or more if supply disruptions continue into next spring or if oil infrastructure suffers further damage, the bank said. Supply has been tightened due to several factors including ongoing U.S.-Iran conflict, constrained shipments through the Strait of Hormuz and Bab-el-Mandeb, refinery outages, lower exports from the Middle East and Russia, and tightened product exports from China. “Continued inventory draws support an average Brent price of around $80/bbl in 2027, but the most important change is an expanding tail risk: strategic and commercial inventories are becoming progressively thinner while physical crude markets are already signaling acute near-term scarcity through extreme backwardation,” Francisco Blanch, commodity and derivatives strategist at the Bank of America, said. Blanch said Organization for Economic Co-operation and Development strategic reserves have already fallen substantially and physical crude is commanding large premiums over the benchmark futures. “Although US refiners and fuel exporters have partly filled the gap, ultra-low product stocks and elevated refining margins indicate that the system has very limited spare capacity,” Blanch said, as he warned that the energy disruptions could morph into a “structural shock.” The bank estimates that disruptions through Hormuz peaked at roughly 14 million barrels per day and have recently averaged between 4 million and 8 million barrels per day compared with prewar levels. Blanch estimates at least 350 million barrels have disappeared from the global above-ground oil inventories since levels peaked in March. He said stocks are about 200 million barrels short of record seasonal lows.
