TLDR
- Bank of America elevated its 2026 Brent crude projection to $77.50/barrel from a previous $61
- Current Brent trading levels reached $103 when the forecast was published
- Approximately 200 million barrels of crude have exited global supply since Strait traffic ceased
- Price targets for U.S. exploration and production firms increased by roughly 17% across the board
- Top investment selections feature Diamondback Energy (FANG), Devon Energy (DVN), and Ovintiv (OVV)
Bank of America has increased its Brent crude price projection for 2026 following supply disruptions through the Strait of Hormuz that have tightened global oil availability faster than markets anticipated.
The financial institution’s updated forecast places Brent at an average of $77.50 per barrel for 2026, representing a substantial increase from the earlier $61 estimate. Trading activity showed Brent at $103 when the analysis was published.
The adjustment reflects the near-complete cessation of oil transit through the Strait of Hormuz, a vital gateway for global energy flows. Typically, approximately 20 million barrels per day of crude and refined products move through this waterway.
According to BofA, traffic “stopped dead, almost two weeks ago.” Pipeline alternatives routing to the Red Sea have proven insufficient to compensate for the volume loss.
The impact has materialized quickly. Close to 200 million barrels of crude have been withdrawn from worldwide supply. This represents approximately half of the 400 million-barrel inventory accumulation documented during the previous year, eliminated within a matter of weeks.
BofA’s revised forecast presents several scenarios tied to how the situation develops. Should oil transit return to normal by April, Brent would average approximately $70 throughout the year. An extension of disruptions into the second quarter would push that average to $85.
A third possibility — which the bank considers less probable — would place Brent at an average of roughly $130 per barrel should disruptions continue into the latter half of 2026.
What Happens When the War Ends?
BofA anticipates markets will shift back into surplus conditions following the conflict’s resolution, bringing Brent back toward $65 in 2027. This outlook assumes supply losses remain temporary.
“With no end to the war in sight, oil stockpiles are draining, and firming the fundamental outlook post-war,” analysts led by Kalei Akamine wrote.
The bank additionally raised its mid-cycle oil price benchmark to $70 Brent from $65, positioning it near the center of its $60–$80 long-term commodity price band.
A separate analysis from BofA analyst Mensah indicated that the oil price surge could trigger increased capital expenditure throughout the energy sector, as firms adjust their spending strategies.
E&P Stocks Get a Boost
The improved oil price environment has translated directly into higher valuations for U.S. exploration and production companies. BofA increased price targets for oil-exposed E&P stocks by approximately 17% on average.
Diamondback Energy (FANG) continues to hold BofA’s top position among large-cap selections.
Devon Energy (DVN) and Ovintiv (OVV) were identified as mid-cap opportunities positioned for valuation upgrades given current oil pricing.
BofA also maintained its Buy rating on California Resources (CRC), highlighting its capital-efficient 2026 strategy and a possible modest production uptick in its 2027 maintenance framework.
