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UBS believes the conflict in the Middle East and low reserves will support oil prices, and has revised its forecast for Brent crude to $110 by the end of 2026. The market is also paying attention to US policy and growth risks.
UBS said in a report that given the unexpected development of conflicts in the Middle East andOil The recovery in production and global oil demand is projected to accelerate by the end of 2026.oil price Prices will reach $110 per barrel, higher than the previous forecast of $100. UBS told in Octoberstrait of hormuz The number of attacks on ships in and around the region has reached record highs, further increasing insurance and freight costs. Freight rates for very large crude oil carriers sailing from the Middle East to China have soared to $30 to $40 a barrel, up from $1 to $3 a barrel last decade. In addition, global crude oil inventories have declined significantly, and the original promise of releasing strategic reserves has largely been fulfilled. As supplies remain tight, commercial inventories are likely to decline further, which will support oil prices.
Jikou Investment Letter said that after the results of the US midterm elections are determined, the market will again focus on US President Trump’s policy trend on the situation in the Middle East. The market is paying attention to whether Trump will choose to launch military strikes again against Iran or join the Saudi Arabia coalition to suppress attacks by Houthi armed groups in Yemen. If Trump chooses to use military means to deal with the Middle East issue, regional tensions may further increase, which will increase the risk premium in the crude oil market and cause oil prices to continue to rise. On the other hand, if Iran does not face new military attacks after the US midterm elections and the situation in the Middle East does not deteriorate further, oil prices may face downward pressure as the market risk premium gradually decreases.
Saul Kavonik, director of energy research at Australian financial services firm MST Markey, said ongoing military operations around the Strait of Hormuz, as well as market skepticism about diplomatic solutions, have kept oil prices high on expectations the conflict could escalate in the coming weeks. Ole Hansen, head of commodity strategy at Saxo Bank, said oil price volatility could intensify in the coming weeks due to the impact of Israeli parliamentary elections and the US midterm elections.
In addition, the Yemeni Houthi armed group claimed to have launched a series of new attacks on targets in Saudi Arabia, including oil infrastructure including two refineries and facilities related to the Abqaiq oil field. Saudi Arabia has not yet confirmed the attack or whether related facilities were affected. If the attack on the Ras Tanura refinery does indeed occur, it would be the second attack on the facility in the past week.
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UBS pointed out that while the direction of the conflict in the Middle East is difficult to predict, limited supply recovery in the Gulf region, a rebound in global demand and a continued decline in inventories, will keep oil prices more supportive due to tight supply and demand.
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In October, attacks around the Strait of Hormuz reached new highs, driving up insurance and freight costs. Freight charges for very large oil tankers being shipped from the Middle East to China increased significantly, further increasing the cost of crude oil.
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The market is focusing on Trump’s policy trends in the Middle East, especially whether using force against Iran or supporting Saudi coalition forces. If the situation worsens, oil prices may increase. If the risk premium falls, oil prices will come under pressure.
