Overview

UBS has revised its outlook for Brent crude, lowering its price forecasts after the benchmark fell roughly $15 per barrel in the ten days following the U.S.–Iran cease‑fire memorandum of understanding (MoU) signed on June 14‑15. Brent slipped below $73 a barrel, a level not seen since late February before the Middle‑East conflict began.

Pre‑MoU Price‑Weighing Factors

UBS strategist Giovanni Staunovo identified several factors that were already suppressing oil prices before the MoU: a sharp decline in Chinese crude imports from 12.58 million barrels per day in February to 7.82 million barrels per day in May; record U.S. crude exports; strategic reserve releases across OECD countries; and moves by Saudi Arabia and the United Arab Emirates to bypass the Strait of Hormuz via overland pipelines.

Post‑MoU Supply Dynamics

Since the MoU was signed, the price decline accelerated as stranded tankers trapped in the Gulf began moving, releasing additional supply. Iran has exported around 40 million barrels since the deal, while roughly 30 million barrels have come from non‑Iranian Gulf floating storage. UBS estimates that between 50 million and 100 million barrels remain trapped in the Gulf, meaning a rapid exit of those tankers could add further short‑term pressure on prices.

Shipping Constraints and Market Outlook

Staunovo notes that the current weakness is likely temporary. Once the additional supply is absorbed, attention will shift to inbound shipments, which require restored shipping confidence, safety assurances, mine clearance, and normalization of insurance premiums. The two alternative routes along the coasts of Oman and Iran can accommodate fewer vessels than the traditional central Strait, and tankers diverted elsewhere must first unload before returning. Iraq’s brief weekend production increase followed by a shutdown due to a shortage of empty ships illustrated these constraints in real time.

Forward‑Looking Expectations

The strategist expects strategic reserve releases to slow after June, Chinese imports to recover, and financial investor positioning—now significantly leaner—to provide a tailwind for prices. Accordingly, UBS now forecasts Brent at $85 a barrel for both the end of September and the end of December 2026, and at $80 a barrel for the end of March and the end of June 2027. These levels are down from the bank’s prior forecasts of $105 for September and $95 for December.