Analysts predict a surge in Brent to $120: the threat to the Strait of Hormuz outweighs the baseline scenario
The oil market is entering a phase of high turbulence. Amid ongoing supply disruptions through the Strait of Hormuz and escalating tensions in the Middle East, the price of Brent crude could surge to $120 per barrel in the second half of the year. This nearly brings quotes close to the historical peak of $126.41, recorded in late April amid the direct conflict between the US and Iran.
Key Drivers of the Rally
The main driver of the current growth is a sharp decline in exports from the Persian Gulf. Supply volumes have fallen below 45% of pre-war levels. Additional pressure comes from the threat of route blockades in the Red Sea, jeopardizing supplies from Saudi Arabia. Experts note that the combination of these factors creates a unique risk scenario.
In the baseline forecast, which assumes de-escalation, Brent is expected to stabilize around $80 per barrel in the fourth quarter and decline to $75 next year. However, current dynamics suggest otherwise: on July 19, amid another wave of tensions, Brent exceeded $90, although hopes for a truce temporarily cooled the market to $88.47 by July 21.
Where Will the Growth Stop?
The decline in global inventories makes the market extremely vulnerable to new shocks. However, slowing imports in China and demand elasticity may limit the potential for further growth. This situation echoes recent forecasts from TD Securities, which also pointed to the depletion of reserve inventories as a key factor supporting prices.
Under current conditions, a long position strategy on the spread between December 2026 and March 2027 in the European diesel market appears most justified. Diesel shortages, refinery issues, and a high probability of rising gas prices due to the Middle East conflict and Russia's actions all indicate that the energy market faces a challenging half-year.
Expert Opinion: In my view, the current situation is a classic example of how geopolitical risks completely offset fundamental demand factors. Investors should prepare for the scenario of $120 becoming a reality by autumn if diplomatic efforts do not yield tangible results in the coming weeks.