Bank of America (BofA) has significantly raised its Brent crude oil price forecast for 2026, citing severe supply disruptions caused by a near-total halt of traffic through the critical Strait of Hormuz. The bank now expects Brent to average $77.50 per barrel in 2026, a sharp increase from its prior estimate of $61. At the time of the report, Brent was trading at approximately $103.
The revision follows an almost complete stoppage of oil shipments through the Strait, a chokepoint for roughly 20 million barrels per day of crude and refined products. BofA analysts noted traffic "stopped dead, almost two weeks ago," and alternative pipeline routes have failed to compensate for the lost volume. This has led to the rapid removal of nearly 200 million barrels of crude from global supply in a matter of weeks, effectively wiping out half of the inventory build recorded in the previous year.
BofA outlined multiple price scenarios based on the conflict's duration. If flows normalize by April, Brent could average around $70 for the year. If disruptions extend into Q2, the average climbs to $85. A more severe, though unlikely, scenario of persistent disruptions into the second half of 2026 could see Brent average around $130 per barrel. The bank projects a market surplus and a price pullback toward $65 in 2027 once the conflict ends, assuming no lasting supply damage.
In response to the stronger price outlook, BofA raised price targets for U.S. exploration and production (E&P) companies by about 17% on average. Its preferred picks include Diamondback Energy (FANG) as a top large-cap choice, alongside mid-cap names Devon Energy (DVN) and Ovintiv (OVV). The bank also reiterated a Buy rating on California Resources (CRC).
Separately, market analysts note the recent volatility, with prices briefly surging close to $120 per barrel on supply fears before retreating to the $80-$90 range. This pullback is attributed to speculation about coordinated government interventions, including potential releases of up to 400 million barrels from global strategic petroleum reserves by entities like the International Energy Agency (IEA), Germany, and Japan. The market remains highly sensitive to geopolitical developments, tanker movements, and the effectiveness of these stabilization measures.
