Bank of America Sees 2 Oil Scenarios

Bank of America's Francisco Blanche outlined two possible outcomes for oil prices, with the best-case scenario seeing Brent crude settle around $90 per barrel by the end of 2026 [1]. However, if the double blockade of the Strait of Hormuz by the US and Iran continues, prices could climb to $120 to $130 per barrel by the end of June to early July [1]. The global energy market is currently short approximately 14 to 15 million barrels of oil per day, roughly 15% of the volume needed to stabilize prices and return Brent to the $60 to $70 per barrel range [1].

The bank's revised 2026 Brent forecast is $77.50 per barrel, up from $61, with a mid-cycle assumption raised to $70 [1]. This shift in the baseline for oil prices indicates that the debate is no longer about whether prices are elevated but by how much and for how long. The effective closure of the Strait of Hormuz has concentrated supply pressure on the Asia-Pacific region, but the pricing impact is felt across every market that settles on Brent or WTI benchmarks [1]. According to Bank of America Securities, a peace deal that leads to a full reopening of the Strait could allow Brent crude futures to average $82 per barrel for 2026, while a partial reopening could keep prices at $103 per barrel on average [2].

The bank's commodity and derivatives strategist, Francisco Blanch, expects any reopening of the Strait to unleash a surge in demand for oil barrels over the next 18 to 24 months, keeping prices elevated [2]. Investors can prepare for these scenarios by considering high-yielding energy plays, such as master limited partnerships, which offer attractive dividend yields [3]. The Tortoise North American Pipeline Fund and the Global X MLP & Energy Infrastructure ETF are examples of such plays, with dividend yields of 3.3% and 4.1%, respectively [3]. As the US-Iran talks and the reopening of the Strait of Hormuz remain uncertain, the question is whether any reopening will be full or partial, and how this will impact oil prices [2].

The outcome of these talks will determine whether Brent crude prices will average $82 or $103 per barrel in 2026, with significant implications for energy investors and the global economy.