UBS cuts oil price forecasts as Hormuz flows recover to 50%

UBS lowered its oil price forecasts for this year and next as the reopening of the Strait of Hormuz and resumption of Iranian exports signaled a supply-driven repricing in crude markets.

UBS on Thursday reduced its 2026 and 2027 oil price forecasts as shipping through the Strait of Hormuz recovered to about 50% of pre-conflict levels and Iranian crude exports regained momentum following an easing of the U.S. blockade, the bank said in a note.

"The recovery in Hormuz transit volumes and the resumption of Iranian exports represent a material shift in the supply outlook that we had not fully incorporated into our prior estimates," the UBS analyst team wrote, though the bank did not disclose the specific new price targets or the magnitude of the reduction.

Brent crude slipped to $72 a barrel as traders weighed the implications of improving supply flows against lingering geopolitical risks. The UAE's oil exports jumped 30% in June to 3.9 million barrels per day, nearing prewar highs, as the country bypassed the Strait of Hormuz via pipeline and tanker routes, according to shipping data. The recovery follows a dramatic collapse in late June, when Hormuz transit fell to just four vessels on June 29 from 70 earlier that week after IRGC strikes on four U.S. bases reversed a post-MOU shipping recovery.

The supply-side repricing carries broad implications. Lower crude costs could ease inflation pressures across importing economies — particularly in India, where the rupee and consumer prices are sensitive to oil swings — while squeezing revenues for OPEC producers already managing output restraint. The forecast revision from a major bank like UBS may trigger further downgrades across the sell side if the shipping recovery accelerates, potentially pushing Brent below the $70 threshold that many fiscal budgets in the Gulf are calibrated against.

Supply Recovery vs. Geopolitical Risk

The fundamental question for traders is whether the Hormuz recovery is durable. While transit volumes have rebounded to half of pre-conflict levels, the route remains vulnerable to further disruption. The June 29 collapse — triggered by IRGC strikes on U.S. bases — demonstrated how quickly shipping can be paralyzed. Efforts to fully restore commercial shipping continue to face major obstacles, according to industry sources.

Iranian crude exports, which had been suppressed by the U.S. blockade, are now regaining momentum. The combination of resumed Iranian supply and recovering Hormuz flows adds roughly 1 million to 2 million barrels per day of potential supply to a market that the International Energy Agency had projected would remain tightly balanced through the second half of 2026.

What Comes Next

The direction of oil prices now hinges on two variables: the pace of Hormuz recovery and the trajectory of U.S.-Iran diplomatic talks in Doha. If shipping normalizes fully and Iranian exports return to pre-sanctions levels, Brent could test the low $60s, according to some traders. Conversely, any renewed escalation in the Strait would reverse the supply gains almost overnight, reintroducing the risk premium that had kept prices elevated through mid-2026.

This article is for informational purposes only and does not constitute investment advice.