Oil prices may stay high into 2027 amid Hormuz disruptions
Oil prices are likely to remain elevated for longer than previously expected as disruptions in the Strait of Hormuz persist, prompting DBS Bank and First Metro Securities Brokerage Corp. to revise their forecasts upward.
In a joint outlook, analysts said the timeline for normalizing traffic in the key shipping route had been pushed back, with a gradual reopening now expected over the next two quarters even if a deal between the United States and Iran is reached within the next few months.
This delay is expected to keep global oil inventories under pressure, supporting higher prices well into 2027.
Singapore’s DBS and First Metro now see Brent crude averaging between $85 and $90 per barrel in 2026, higher than the earlier $80 to $85 range.
For 2027, prices are projected at $72 to $77 per barrel, also revised up from $65 to $70.
The forecast outlined three scenarios, with risks skewed toward higher prices if negotiations stall or tensions escalate.
Under a base-case scenario, which carries a 50-percent probability, a deal is reached within the second quarter, allowing the Strait to gradually reopen by May or June.
Even then, normalization is expected to take months, with production losses lingering and demand supported by inventory drawdowns.
In this scenario, oil prices may trade between $90 and $110 per barrel in the near term, with possible spikes toward $125, before moderating to around $80 per barrel by year-end.
Prolonged negotiations
A bear-case scenario, assigned a 30-percent probability, assumes prolonged negotiations with no immediate deal and a continued closure of the Strait.
Supply losses would become more acute, while support from floating storage and strategic reserves diminishes.
Oil prices could rise to $110 to $125 per barrel, with spikes toward $150 possible, before easing to around $90 to $100 as demand destruction sets in.
In a worst-case scenario with a 20-percent probability, talks break down completely, the ceasefire collapses, and the conflict escalates into a broader regional crisis.
Key supply routes, including pipelines in Saudi Arabia and Fujairah and the Red Sea corridor, could be disrupted. Under this scenario, oil prices may exceed $125 per barrel, with fears of reaching $150 to $200 resurfacing.
Despite concerns over potentially looser supply dynamics within OPEC+, including the possible exit of the United Arab Emirates, analysts said the delayed reopening of the Strait of Hormuz would likely outweigh these factors, keeping oil prices elevated for longer than previously anticipated.
