Geopolitical Tensions Push Brent Crude Prices Above 100 Dollars

Brent crude oil prices are expected to remain above US$100 per barrel and could rise further if tensions between the United States and Iran persist, threatening the Strait of Hormuz. BMI Research, part of Fitch Solutions, has revised its Brent price forecasts, now predicting an average of US$107 per barrel in the fourth quarter of 2026 and US$112 in the first quarter of 2027. This outlook is driven by rising crude demand and supply constraints, which are depleting market buffers and increasing exposure to geopolitical risks and production outages.

Kenanga Research has also adjusted its forecasts, raising the Brent crude price expectations to US$91 per barrel for 2026 and US$85 for 2027. The revision accounts for prolonged U.S.-Iran tensions and Middle East geopolitical uncertainties. Although a partial deal between the U.S. and Iran is anticipated in 2027, Kenanga Research has added a US$5 per barrel premium to its forecast to reflect lingering geopolitical risks.

Despite economic challenges, refiners are maintaining high demand for crude oil, supported by government measures to mitigate higher energy costs. This has intensified price pressures in fuel markets due to supply disruptions from the U.S.-Iran and Russia-Ukraine conflicts. On the supply side, BMI Research notes that spare production capacity outside the Middle East Gulf is nearly exhausted, with limited new projects expected in the near term. However, once a preliminary U.S.-Iran deal is reached, BMI Research anticipates a sharp decline in oil prices, with Brent futures dropping to US$77 per barrel in the second quarter of 2027 and further to US$70 and US$67 in the third and fourth quarters, respectively.

For Malaysia, Kenanga Research suggests that higher crude oil prices could support a recovery in upstream oil and gas spending from 2027, though it is unlikely to lead to a multi-year upcycle. The research house recommends investors consider upstream services for attractive risk-reward opportunities as the industry enters a potential two-year capital expenditure upcycle. PETRONAS’ upstream capital expenditure is expected to increase year-on-year in 2027, with a peak anticipated in 2028.

Economist Carmelo Ferlito warns that sustained oil prices above US$100 per barrel could negatively impact Malaysia’s demand and growth by increasing transport, logistics, and production costs. However, he argues against blanket subsidies, emphasizing the need for targeted vouchers for vulnerable households and a transition towards market-determined energy prices to encourage efficiency and investment in alternatives.