Bank of America has revised upward its outlook for Brent crude in 2026, saying disruptions in the Strait of Hormuz have tightened global oil supply and prompted faster-than-expected inventory declines.
The bank now projects Brent will average $77.50 per barrel in 2026, an increase from its prior estimate of $61 per barrel. That figure incorporates multiple potential paths depending on how long the disruption to flows lasts.
At the time of writing, Brent was trading at $103 per barrel.
BofA frames its updated 2026 forecast around two scenarios it deems equally likely. In the first, oil shipments through the Strait normalize by April and Brent averages roughly $70 per barrel for the year. In the second, the conflict persists into the second quarter, lifting the 2026 average closer to $85 per barrel. The bank also notes a more extreme outcome - which it considers unlikely - in which continued disruption into the second half of the year would push the 2026 average to about $130 per barrel.
"When the war ends, the team sees oil markets reverting to a surplus, driving Brent back to $65 in 2027 - contingent upon no ongoing supply losses," analysts led by Kalei Akamine wrote.
BofA points to a clear, measurable effect on global supply. Around 20 million barrels per day of crude and refined products typically pass through the Strait of Hormuz, a key chokepoint for international energy trade. "Traffic through the Strait stopped dead, almost two weeks ago," the bank said, and added that alternative pipeline routes to the Red Sea have not been able to make up for the lost volumes.
As a consequence of the halted flows, BofA estimates that nearly 200 million barrels of crude have been removed from the market so far. That reduction has erased roughly half of last year’s inventory build, which the bank records at about 400 million barrels.
With inventories falling and supply constrained, the bank says fundamentals have firmed and the long-term price outlook has shifted higher. BofA writes that, "With no end to the war in sight, oil stockpiles are draining, and firming the fundamental outlook post-war," and points to a longer-run Brent strip around $70 per barrel.
Reflecting the stronger pricing environment, BofA increased its mid-cycle oil assumption to $70 Brent, up from $65, situating that assumption near the midpoint of the bank’s stated long-term commodity price range of $60 to $80 per barrel.
The revised oil outlook has also fed through to company valuations. BofA says higher forecasts have lifted valuations across the U.S. exploration and production sector, and that it boosted price targets for oil-levered E&P companies by about 17% on average.
Within its coverage, the bank continues to favor Diamondback Energy among large-cap producers. It also highlights Devon Energy and Ovintiv as mid-cap names that could present attractive opportunities for valuation re-rating. Separately, BofA reiterated a Buy rating on California Resources, citing its capital-efficient 2026 plan and the potential for modest growth in a 2027 maintenance case.
The bank’s update includes clear conditionality: higher average prices in 2026 depend on the duration of disruptions in the Strait of Hormuz, and any return to surplus conditions after the conflict would weigh on prices in 2027, provided there are no ongoing supply shortfalls.
Readers should note that the bank’s scenarios span a wide range of outcomes, from an early normalization that leaves 2026 averages near $70, to a prolonged interruption that could push averages substantially higher, though the most extreme outcome is judged unlikely by the bank.
Summary: Bank of America raised its 2026 Brent crude forecast to $77.50 per barrel from $61, citing supply disruptions in the Strait of Hormuz that have removed about 200 million barrels from the market and erased roughly half of last year’s 400 million-barrel inventory build. The bank models two equally likely scenarios for how long the disruption endures and has increased its mid-cycle Brent assumption to $70.