UBS has lowered its oil price forecasts for 2026 and 2027 after shipping flows through the Strait of Hormuz recovered faster than expected.
The improvement followed an interim memorandum of understanding signed by the United States and Iran on June 17. The agreement helped reduce geopolitical risks and ease restrictions on regional oil exports.
Brent and WTI Forecasts Lowered
UBS now expects Brent crude oil to average $84 per barrel in 2026. This represents a $9 reduction from its previous estimate.
For 2027, the bank lowered its Brent forecast by $10 to $75 per barrel.
UBS also cut its West Texas Intermediate forecast to $79 per barrel for 2026 and $71 per barrel for 2027.
Analysts led by Henri Patricot said lower geopolitical risk and the rapid recovery in oil flows had caused prices to fall more sharply than expected.
Brent Could Recover During Late 2026
UBS expects Brent crude to average around $80 per barrel during the second half of 2026 as demand improves and floating oil storage in the Gulf returns to normal levels.
However, the latest forecast is significantly lower than the bank’s previous estimates of $105 per barrel for the third quarter and $90 for the fourth quarter.
The bank maintained its longer-term Brent price assumption of $75 per barrel from 2028 onwards.
Strait of Hormuz Oil Traffic Rebounds
Oil shipments through the Strait of Hormuz have recovered to approximately 50% of their pre-conflict levels since the US-Iran agreement was announced.
Iranian crude exports have also regained momentum as the United States gradually eases its blockade.
Exports from the United Arab Emirates have returned to almost 85% of pre-conflict levels. The country has benefited from alternative export routes that bypass the Strait of Hormuz.
Saudi Arabian exports remain around 25% below pre-conflict levels. Nevertheless, the kingdom’s June export volumes increased by approximately 10% compared with May.
Oil Price Risks Remain in Both Directions
UBS warned that the outlook for oil prices remains highly uncertain.
A collapse of the US-Iran agreement could push Brent crude back toward $100 per barrel. Prices could rise to $120 or more if major oil infrastructure is attacked and the conflict continues beyond the summer.
On the other hand, a faster recovery in shipping flows and higher production from Iran and the UAE could drive Brent below $70 per barrel.
UBS added that a combination of stronger regional production and a recovery in Venezuelan output could push oil prices toward $60 per barrel or lower.
UBS Reduces Inventory Rebuild Estimate
The bank also lowered its estimate for the rebuilding of global oil inventories in 2027.
UBS now expects inventories to increase by approximately 1 billion barrels, compared with its previous forecast of around 1.5 billion barrels.
The revision reflects the faster-than-expected recovery in global oil supply and a smaller projected deficit.
Oil Market Expected to Move Into Surplus
According to UBS, the global oil market is expected to remain in deficit through the third quarter of 2026.
However, the market could move into a surplus of 2.9 million barrels per day during the fourth quarter.
That surplus is forecast to widen to approximately 3.8 million barrels per day in 2027 as production continues to recover.
China’s Oil Imports Fall Sharply
UBS also highlighted China’s importance as a flexible buyer in the global crude oil market.
Chinese oil imports dropped to around 6 million barrels per day in June. This was significantly below the country’s typical import range of between 10 million and 11 million barrels per day.
Lower Chinese demand could add further pressure to oil prices if global production continues to rise.
