Oil Forecasts Revised Higher as Iran Conflict Threatens Refineries

Oil prices continue reacting as tensions intensify across the region. WTI crude futures rose more than $2.40 per barrel Thursday morning and are now roughly $10 per barrel above last Friday's close, reflecting heightened uncertainty around global petroleum supply flows.

As the situation evolves, markets are closely watching for new clues on what comes next. Today, we'll explore 4 evolving items that have impacted markets:

• Revisions in oil forecasts by major banks
• Iran attacks on Middle East refineries
• Rumors of Iranian efforts to negotiate
• US military expanding operations

Banks Raise Oil Price Forecasts

Financial institutions are beginning to adjust their outlook for crude prices as the conflict threatens shipments through key energy corridors. Goldman Sachs raised its second-quarter 2026 forecast for Brent crude by $10 to $76 per barrel and increased its WTI estimate by $9 to $71.

The bank expects that reduced oil flows through the Strait of Hormuz could lead to a significant decline in OECD inventories and lower Middle Eastern production levels in the coming months. The Strait of Hormuz remains one of the world's most critical energy chokepoints, carrying roughly one-fifth of global oil and liquefied natural gas shipments.

Goldman analysts warned that if export volumes through the strait remain constrained for several more weeks, Brent prices could approach $100 per barrel as markets attempt to prevent inventories from falling to critically low levels.

UBS also increased its Brent crude price outlook for both the first quarter and the full year of 2026. The bank now expects Brent to average about $71 per barrel in the first quarter, implying prices near $80 per barrel in March, and $72 per barrel for the full year, roughly $10 higher than its previous forecast. UBS noted that attacks on regional energy infrastructure, such as Qatar's LNG facilities, could push Brent above $90 per barrel, while a prolonged closure of the Strait of Hormuz could drive prices beyond $100.

Iranian Counterstrikes Target Energy Infrastructure

The conflict has increasingly spilled into energy infrastructure and shipping routes, raising concerns about the stability of regional supply. Iran launched a wave of missile strikes early Thursday, while Iranian forces have also been linked to attacks on vessels in the Gulf.

An oil tanker was struck off the coast of Iraq earlier in the day, with Iranian media reporting that the Islamic Revolutionary Guard Corps Navy targeted a vessel near Iraqi waters. Continued attacks on tankers have slowed traffic through the Strait of Hormuz, leaving hundreds of vessels waiting in the waterway as shipping activity declines. Attacks have also been reported on several refineries across the region, including Saudi Arabia's largest refinery. Natural gas fields have been similarly targeted.

Energy infrastructure across several regions has also been affected. Some refineries in the Middle East, China, and India have shut crude processing units as supply disruptions limit available feedstock. As a result of tighter fuel supply expectations, European diesel futures climbed to their highest level since October 2022.

Natural gas markets are also showing signs of strain. Qatar declared force majeure on liquefied natural gas shipments during the conflict, while Russia warned that remaining gas flows to Europe could be halted.

Iran Signals Willingness to Negotiate

Despite the escalation, Iran has quietly signaled openness to discussions with the United States on ending the conflict, according to reports. The message was reportedly conveyed through a third country to the Central Intelligence Agency. However, U.S. officials said no negotiations are currently underway, noting that any diplomatic breakthrough between the two countries still appears distant.

Regardless of whether the reports are true or not, markets reacted to the news with a steep downward move when initially reported. When the US indicated that no talks are underway and that negotiations remain far away, the market quickly moved higher.

U.S. Military Expands Operations

The United States has increased its military involvement in the region as the conflict continues. President Donald Trump said the U.S. was "doing very well on the war front" and indicated the military was moving toward "complete and total control of Iranian airspace." Defense Secretary Pete Hegseth said the duration of U.S. operations remains uncertain, suggesting the conflict could last anywhere from three to eight weeks.

The growing military presence has intensified market concerns about further disruptions to global energy trade. Economists estimate that crude prices near $80 per barrel could increase global inflation and modestly slow economic growth. If prices were to approach $100 per barrel, the economic effects could become more pronounced.

For now, markets remain focused on developments in the Strait of Hormuz and the broader Middle East. With tanker attacks continuing, refinery outages spreading, and military operations expanding, stakeholders must keep watching whether the conflict will escalate further or move toward negotiations in the weeks ahead.