Standard Chartered Bank (StanChart) has revised its oil price forecasts, predicting a significant rise in prices due to the ongoing conflict between Iran and the United States and its allies. The bank's analysts predict Brent crude oil prices to average $74 per barrel in the first quarter of 2026, a substantial increase from the previous forecast of $62 per barrel.
The conflict has escalated after the U.S. and Israel conducted airstrikes, prompting Iran's retaliatory missile and drone attacks on targets in Israel and Gulf states. This has led to heightened tensions and concerns about oil supply disruptions. StanChart's analysts highlight that the conflict's impact extends beyond last year's symbolic response, as it has triggered multiple regional flashpoints, including potential contagion affecting U.S.-operated assets.
The Strait of Hormuz, a critical energy transit route, is a major concern. It handles approximately 31% of seaborne crude and condensate, primarily destined for China and India. Any disruption here could significantly impact global oil markets. Additionally, the Strait is crucial for 19% of LNG, 19% of jet fuel and kerosene, and 33% of global fertilizer transit.
Insurance premiums and supertanker shipping costs have soared due to the increased risk of mines and missiles. Supertanker freight rates from the Middle East to China on the TD3 route now exceed $400,000 per day, a significant increase from the previous rate and a six-year high. This includes war-risk bonuses and hazard pay for crews, making it uneconomical for most companies.
Tanker tracking indicates that Chinese vessels are primarily handling the limited transit, which could lead to higher landed crude costs even if the flat price stabilizes. This is because the freight premium may become a structural cost if it persists for an extended period.
However, there are some mitigating factors. Saudi Arabia and the UAE have pipelines with spare capacity, estimated at 2.6 million barrels per day, which could help redirect exports. These pipelines include the East-West pipeline in Saudi Arabia and a pipeline from the UAE's onshore fields to Fujairah on the Gulf of Oman.
Alternative routes for refined products and LNG are more limited. Qatar's declaration of force majeure on LNG deliveries has taken about 20% of global LNG production offline, primarily affecting Asian customers. This, coupled with the shutdown of some Israeli fields, has exposed the structural vulnerability of the LNG market, causing buyers to scramble for spot cargoes.
The panic buying of JKM to cover lost cargoes has pushed its premium over the Dutch Title Transfer Facility (TTF) to its highest level since 2021. European natural gas futures have surged, while U.S. gas markets remain relatively insulated. This situation underscores the complex and interconnected nature of the global energy market and the potential for widespread impact from regional conflicts.
