UBS cut its 2026 Brent crude average forecast to $84 a barrel from $93, citing a rapid recovery in Strait of Hormuz flows after a U.S.-Iran memorandum of understanding. The bank sees a near-term supply surplus but still expects prices to rebound to about $80 in the second half of 2026.
UBS Group lowered its 2026 Brent crude average price forecast to $84 per barrel from $93, pointing to easing geopolitical risk and a fast rebound in transit through the Strait of Hormuz. The bank also cut its 2027 Brent forecast from $85 to $75, while WTI was revised down to $79 and $71 for those years. UBS left its long-term 2028 Brent assumption at $75 unchanged.
Hormuz flows drive a short-term glut
A U.S.-Iran memorandum of understanding eased tensions and let shipping recover quickly. UBS tracking data shows crude exports via the Strait of Hormuz reached nearly 10 million barrels per day over the past 10 days. Add roughly 5 million barrels per day through bypass pipelines, more than 2 million from strategic reserves, and a roughly 5 million barrel-per-day drop in Chinese imports, and the market swung into a short-term surplus.
That glut tipped the Brent near-month futures curve into slight contango. However, UBS notes that inbound tankers are rising while actual loading volumes have not recovered much, so exports may see periodic pullbacks before normalizing.
Prices still seen rebounding
Despite the cut, UBS expects Brent to climb back to around $80 in the second half of 2026 as Gulf floating storage draws down and demand recovers. The bank says the agreement has not fully resolved disagreements over Iran’s nuclear program, strait transit arrangements, and maritime security, so a relatively high risk premium stays in the market. It trimmed the 2027 inventory rebuild estimate to roughly 1 billion barrels from nearly 1.5 billion.
China has become the swing factor. Its crude imports fell to about 7 million barrels per day in May and roughly 6 million in June from the usual 10–11 million, as refinery run cuts and inventory drawdowns eased global pressure.
The range around the base case
Under its base case, UBS sees Brent trading between $65 and $85 in the near term. A collapse of the agreement and fresh disruption at Hormuz could push prices back above $100, potentially reaching $120 in a severe scenario. If shipping normalizes and the UAE, Iran, and OPEC+ ramp up output, Brent could fall below $70, with an extreme case near $60.
Source: Futu
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