UBS Cuts Brent Crude Forecast, Citing Recovery in Hormuz Strait Oil Flows
Miles Bennett
UBS on July 2 cut its 2026 Brent average forecast from $93.28 to $83.74 a barrel, driven by the recovery of oil transit through the Strait of Hormuz to roughly half its pre-conflict level — easing global supply pressure.
What exactly did UBS change?
Q3 and Q4 2026 forecasts both move to $80/bbl; the full-year average drops from $93.28 to $83.74 — nearly $10 shaved off in one cut.
The 2027 average falls by the same margin, from $85 to $75.
The long-term anchor (2028 onward) stays at $75/bbl — unchanged.
This means → UBS sees the oil-price centre of gravity shifting structurally lower, not just dipping on a short-term blip.
Why does the Strait of Hormuz matter so much?
The Strait of Hormuz — the narrow waterway through which roughly a fifth of global oil shipments must pass — is the core driver behind this downgrade.
Since the US–Iran memorandum of understanding was signed, oil transit through the strait has recovered to about 50% of pre-conflict levels; Iranian exports are regaining momentum as US restrictions ease.
In plain terms = a pipeline that was blocked is reopening; more oil is reaching the market, and that pushes prices down.
Could oil fall further — or snap back?
Downside: faster reopening of the strait + strong supply growth from the UAE and others → Brent could slide toward $70/bbl.
Upside: if the memorandum collapses and strait flows are disrupted again → Brent could return to $100; a more severe supply shock could push it to $120/bbl.
UBS frames the trading range at $70–$100/bbl, with direction hinging on two variables: the pace of Hormuz normalisation and whether the US–Iran deal holds.
What signals are easy to miss?
Tankers entering the Persian Gulf currently number only about half those leaving (a ratio of roughly 1:2) — normalisation is gradual, not a switch.
Slowing Chinese demand growth means there is no urgent need to draw down inventories; imports may stay subdued in the near term.
This reflects pressure from both sides at once — supply loosening while demand stays flat — squeezing oil prices from two directions.
Is natural gas caught in the same current?
The retreat of geopolitical risk premium is spilling into the liquefied natural gas (LNG) market as well.
UBS cuts its Japan Korea Marker LNG forecast for the rest of this year from $22 to $17.5 per million British thermal units, and its 2027 forecast from $14.5 to $13.
This means → the easing of Hormuz chokepoint risk is not confined to crude; the "fear premium" across the entire energy pricing system is fading.
Is the market already pricing this in?
As of 09:17 GMT on July 2, Brent futures fell 1.3% to $70.64/bbl; WTI dropped by the same margin to $67.72/bbl.
That marks a third consecutive session of declines.
Put simply = the market did not wait for UBS's report — oil prices are already voting with their feet, validating the same thesis: the supply-recovery expectation is materialising.
Content is for reference only, not financial advice.