Global oil prices are projected to climb further this year, with a recent Reuters poll indicating heightened supply risks stemming from ongoing shipping disruptions in the Strait of Hormuz and Red Sea. The persistent geopolitical risk premium, fueled by the US-Iran conflict, is expected to maintain market volatility through the second half of 2026.
This story is critical for energy markets as it underscores the enduring impact of Middle East geopolitical instability on global crude supply and pricing. The dual chokepoint disruptions in the Strait of Hormuz and the Bab el-Mandeb Strait are forcing a re-evaluation of supply chain resilience and adding significant risk premiums, directly affecting refiners, traders, and consumers worldwide.
Executive Summary
A Reuters poll of 31 economists and analysts forecasts Brent crude averaging $85.22 per barrel in 2026, an increase from June's $84.50 projection, while U.S. crude is expected to average $80.14 per barrel, up from $79.49. These upward revisions reflect the sustained impact of the US-Iran conflict, which began in late February and has severely curtailed traffic through the Strait of Hormuz, a critical waterway for approximately one-fifth of global crude and natural gas supplies. The conflict has disrupted millions of barrels per day of Middle East output, with recent renewed attacks ending a brief lull in fighting.
What Happened
The US-Iran conflict, initiated in late February, has led to a sharp reduction in shipping traffic through the Strait of Hormuz, significantly impacting Middle East oil output. Concurrently, Iran-backed Houthi militia attacks have disrupted shipping in the Bab el-Mandeb Strait, creating a second critical chokepoint for oil flows.
Key Developments
- Price Forecasts Rise: Brent crude is now forecast to average $85.22/barrel in 2026, up from $84.50, while U.S. crude is projected at $80.14/barrel, an increase from $79.49.
- Hormuz Disruptions Persist: The US-Iran conflict has sharply reduced traffic through the Strait of Hormuz, which previously handled about one-fifth of global crude and natural gas supplies.
- Red Sea Chokepoint: Houthi militia attacks in the Bab el-Mandeb Strait have established a second significant chokepoint, further exacerbating supply risks.
Regional Context
The ongoing US-Iran conflict and Houthi actions underscore a deteriorating security landscape across the Middle East, directly threatening vital maritime trade routes. This regional instability has profound implications for global energy security and supply chain reliability.
Market Impact
Traders and refiners face elevated costs due to higher insurance premiums and longer transit times, as vessels reroute to avoid conflict zones. Analysts are closely monitoring the geopolitical risk premium, which remains a key driver of oil prices and is expected to sustain market volatility.
Outlook
Normalization of oil flows from the Gulf is anticipated to take four to six months following any US-Iran agreement, suggesting sustained market tightness. Global oil demand growth is also projected to decline in 2026, adding another layer of complexity to the supply-demand balance.
