Oil Prices Surge Amid Ongoing Middle Eastern Conflicts

Oil prices are expected to continue rising throughout the year due to ongoing conflicts in the Middle East, particularly involving Iran. The Strait of Hormuz, a critical waterway that handles one-fifth of global crude oil and natural gas shipments, has been severely impacted by US-Iran tensions.

The disruption has led to an increase in the geopolitical risk premium associated with Iranian hostilities, which is expected to persist into the second half of the year. As a result, Brent crude prices are projected to average $85.22 per barrel in 2026, up from $84.50 in June.

Another key chokepoint, the Bab el-Mandeb Strait, has also been disrupted due to Houthi militia activity backed by Iran. This has further compounded supply concerns and led to estimates that normalizing Gulf oil flows will require four to six months following a durable ceasefire between the US and Iran.