Brent: A growing premium for geopolitical risk – ING

Supply risks, rather than current fundamentals, are driving oil market sentiment, with ICE Brent climbing 4% to just above $113/bbl, according to ING strategists Warren Patterson and Ewa Manthey. As concerns mount over renewed US–Iran tensions in the Persian Gulf, the strategists question whether their earlier forecast for Brent to average $80/bbl in 4Q26 remains achievable. A persistent geopolitical risk premium is likely to remain reflected in prices.

Can Brent Average $80/bbl as US–Iran Tensions Drive Prices Higher?

"Oil prices surged yesterday, with front-month ICE Brent settling 4% higher at just above $113/bbl. The rally is being driven less by current fundamentals than by mounting supply concerns. Markets are increasingly worried about renewed escalation in the Persian Gulf, a scenario that could threaten oil flows that have so far remained remarkably resilient."

"Reports suggest President Trump is considering fresh strikes on Iran, while the US is reinforcing its military presence in the region with the deployment of a second aircraft carrier. Meanwhile, there are reports that US troops have been evacuated from some bases in the Middle East. Clearly, these developments don’t paint an optimistic picture."

"They call into question our long-held view that the US midterm elections would bring de-escalation and normalisation in flows and oil prices. If anything, re-escalation seems the most likely path. As a result, our expectation that ICE Brent would average $80/bbl over 4Q26 is looking unattainable."

"Even if tensions don't re-escalate, the mere possibility is likely to keep a sizeable geopolitical risk premium embedded in prices."

(This article was prepared with assistance from an Artificial Intelligence tool and reviewed by an editor. Find out more.)