Escalating attacks around the Strait of Hormuz and on Gulf infrastructure have pushed crude back above $109 per barrel, although leading banks still expect prices to ease by year-end if supply keeps recovering.
Oil traded close to a five-month high at the start of the week. Brent settled above $109 a barrel after rising almost 4% on Friday, as traders positioned for possible weekend escalation in the Iran war. Prices briefly rose further on Monday after Iran said it had no choice but to assert control over the Strait of Hormuz, while US lawmakers continued to resist President Donald Trump’s diesel export deal with Russia.
Pressure on supply is coming from several directions. Iran-backed Houthi militants claimed attacks on Saudi Arabia, and Ukraine struck oil facilities in Russia. Iran has also escalated attacks on tankers in the Persian Gulf, the Strait of Hormuz and the Gulf of Oman in an effort to restrict crude exports from the region. Market data indicate that at least 18 vessels were attacked in the Gulf over the preceding fortnight.
Physical flows have partly recovered. US Energy Secretary Chris Wright said crude shipments leaving the Gulf have rebounded to nearly 80% of pre-war levels, although refined fuel supplies remain more constrained. In August, the International Energy Agency cut its 2026 global oil supply forecast to 102 million barrels per day, citing the collapse of the ceasefire and a renewed closure of the strait. The contrast with a year ago is significant: Brent was trading at about $61 per barrel at this time last year.
Investor Outlook
The consensus view is that current prices reflect a geopolitical premium rather than settled fundamentals. Goldman Sachs sees Brent at $90 by December despite continued Gulf supply risk. The bank’s head of oil research, Daan Struyven, said in an October 16 note that supply adaptation should eventually lower prices, although renewed escalation could delay that adjustment. A broader Reuters poll early this month put the 2026 Brent average at $89.05 per barrel, up from $85.08 a month earlier. HSBC’s forecast assumes only gradual improvement in shipping and a structurally impaired Hormuz, with liquids flows well below the 19 to 20 million barrels per day that passed through the waterway before the war.
For investors, three implications stand out:
- Volatility, not direction, is the near-term trade. The gap between spot prices near $110 and year-end forecasts near $90 indicates that markets are pricing duration risk. Each escalation or de-escalation will move prices sharply.
- African producers outside the Gulf benefit on two fronts. Nigerian, Angolan, Libyan and Algerian barrels avoid Hormuz transit risk and command firm pricing. Upstream cash flows and fiscal receipts for these producers should remain strong through Q4, although the benefit to governments depends on output stability and how much of the windfall is consumed by fuel import and subsidy costs.
- Capital is repositioning toward Africa. At African Energy Week in Cape Town last week, bp’s message was that with global markets shifting and Middle East conflict persisting, Africa’s oil and gas sector may attract strong capital. Jurisdictions that offer regulatory clarity and fast approvals are best placed to capture it.
