Bank of America Lifts 2026 Brent Crude Forecast Due to Strait of Hormuz Supply Disruptions
TLDR
- Bank of America upped its 2026 Brent crude forecast to $77.50 per barrel, up from $61
- Brent was trading at $103 at the time of writing
- Nearly 200 million barrels of crude have been taken out of the global market since oil traffic through the Strait stopped
- Bank of America raised price targets for U.S. E&P companies by approximately 17% on average
- Preferred selections include Diamondback Energy (FANG), Devon Energy (DVN), and Ovintiv (OVV)
Bank of America has increased its Brent crude price forecast for 2026 following disruptions in the Strait of Hormuz that began tightening global oil supply at a pace that took markets by surprise.
The bank now anticipates Brent to average $77.50 per barrel in 2026, a significant rise from its previous estimate of $61. Brent was trading at $103 at the time of writing.
The revision is propelled by a near-total halt in oil traffic through the Strait of Hormuz, one of the world’s most crucial energy chokepoints. Normally, around 20 million barrels per day of crude and refined products pass through the Strait.
Bank of America stated that traffic “ceased completely, almost two weeks ago.” Alternative pipeline routes to the Red Sea have failed to offset the lost volume.
The outcome has been rapid. Nearly 200 million barrels of crude have already been removed from global supply. That’s roughly half of the 400 million-barrel inventory build recorded last year, eliminated in weeks.
Bank of America’s updated forecast presents multiple scenarios depending on how the conflict unfolds. If oil flows normalize by April, Brent is expected to average around $70 for the year. If the disruption extends into the second quarter, that average climbs to $85.
A third scenario — considered unlikely by the bank — would see Brent average around $130 per barrel if disruptions persist into the second half of 2026.
What Happens When the War Ends?
Bank of America expects markets to swing back into surplus once the conflict ends, pulling Brent back toward $65 in 2027. That projection assumes no lasting supply losses.
“With no end to the war in sight, oil stockpiles are depleting, and solidifying the fundamental outlook post-war,” analysts led by Kalei Akamine wrote.
The bank also raised its mid-cycle oil price assumption to $70 Brent from $65, placing it near the middle of its $60–$80 long-term commodity price range.
A separate note from BofA analyst Mensah highlighted that the oil price shock could drive an increase in capital expenditure across the energy sector, as companies readjust their spending plans.
E&P Stocks Get a Boost
The stronger oil price backdrop has directly influenced U.S. exploration and production valuations. Bank of America raised price targets across oil-levered E&P names by about 17% on average.
Diamondback Energy (FANG) remains Bank of America’s top pick in the large-cap category.
Devon Energy (DVN) and Ovintiv (OVV) were identified as mid-cap names with room for a valuation re-rating at current oil prices.
Bank of America also reaffirmed its Buy rating on California Resources (CRC), pointing to its capital-efficient 2026 plan and a potential modest production increase in its 2027 maintenance scenario.