Oil's "new normal" is looking more expensive
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Aïda Amer/Axios
Major banks are upping their oil price estimates for the months and even years ahead.
Why it matters: Despite White House claims that it controls the Strait of Hormuz, the status of the vital energy chokepoint and other regional shipping could be messy for a long time.
- The banks' reports underscore how disruption around the strait is a potentially lasting feature of the global energy landscape.
The big picture: "We think the market is adjusting to a disrupted 'new normal' in which the strait is neither fully closed nor fully open, but persistently impaired," HSBC Global Investment Research said in a note yesterday.
- Goldman Sachs' analysts this week cited a "new assumption that Mideast shipping disruptions continue into 2027" when revising their forecasts upward.
- "Markets are increasingly pricing a prolonged Mideast conflict," its Sept. 7 note states.
State of play: Oil prices are at their highest levels in six weeks, trading at $100.93 Wednesday morning.
Zoom in: Goldman this week upped its December Brent crude outlook to $85 and its average 2027 price to $80.
- Bank of America just raised its "baseline" forecast to $83 for the second half of 2026 and $75 next year.
- HSBC forecasts $95 Brent in Q4; boosted its 2027 forecast by $20 (!) to $85, and raised its longer-term outlook to $75 from 2028 onwards.
- "The revision to our crude oil price forecasts reflects a permanent disruption of the Strait of Hormuz and a longer path back to market equilibrium," HSBC analysts write.
Threat level: These and other banks caution that things could get much more expensive.
- BofA's baseline assumes oil transits "gradually normalize" and "prolonged" conflict is avoided. But if "skirmishes curbing oil flows continue into year end," Brent could trade at $95-$120.
- Goldman sees a potential jump above $120 if average oil output from the Gulf region remains 4 million barrels per day below pre-war levels in 2027.
- HSBC's "stalemate" case sees $120, "easing once demand destruction and faster non-OPEC supply" restore balance in the third quarter of 2027.
My thought bubble: Oil outlooks are written in faint pencil. More important: changing assumptions that now see higher prices sticking around for a long time.
Yes, but: Uncertainty runs both ways. These types of outlooks also have downside cases with more normalization and much lower prices.
What we're watching: The price tag for governments' new emphasis on energy security after multiple crises in recent years.
- "The war in Ukraine, the conflict with Iran, and the broader fragmentation of the global trading system have fundamentally altered how governments think about energy supply," states a new, wide-angle Barclays report on the energy landscape.
- Redundancy and diversity of oil and gas supplies is newly chic.
"The result is a global energy system that is less integrated, more regionalised, and more expensive to operate," it states.
What's next: Market-watchers get more to chew on.
- The U.S. Energy Information Administration will release its latest 2026-2027 outlook today.
- The International Energy Agency's closely watched monthly oil report lands Friday morning.
Sign up here for Axios' Future of Energy newsletter.
