On Monday, European Union foreign ministers rejected demands by U.S. President Donald Trump to help secure the Strait of Hormuz through military means, with Europe only keen on further bolstering the security of its own military bases in the region. Previously, Kaja Kallas, Vice-President of the European Commission, proposed extending the mandate of Operation Aspides to boost security in the Strait of Hormuz amid rising tensions and energy disruptions. Aspides is an active EU military operation launched in 2024 to safeguard merchant shipping and restore freedom of navigation in the Red Sea, the Gulf of Aden, and surrounding waters.
However, European leaders are eager to avoid being dragged into the war, “This is not our war. We have not started it,” said Germany’s Defence Minister Boris Pistorius. “What does … Trump expect a handful or two handfuls of European frigates to do in the Strait of Hormuz that the powerful US Navy cannot do?” he added. And now energy and commodity analysts at Standard Chartered have predicted that oil prices will remain higher for longer than previously expected, thanks to the absence of clear ‘off-ramps’ in the ongoing conflict.
StanChart has increased its average Brent price forecast for 2026 to $85.50/bbl from $70.00/bbl and for 2027 to $77.50/bbl from $67.00/bbl. However, StanChart has predicted that oil prices will gradually ease as the months and quarters roll on, with Brent crude averaging $78.00/bbl in Q1 2026; $98.00/bbl in Q2 2026, $85.00/bbl in Q3 2026 and $80.50/bbl in Q4 2026.
Related: Little-Known US Company Lands Important Pentagon Contract in Rare Earth Race
StanChart estimates that the Middle East war has cut global oil supply by 7.4-8.2 million barrels per day (mb/d), with Iraq’s production down by 2.9 mb/d, 2.0-2.5 mb/d in Saudi Arabia, 0.5-0.8 mb/d in the UAE, 0.5 mb/d in Qatar and 0.5 mb/d in Kuwait. Further, the commodity experts estimate that Iranian production is 1 mb/d lower than pre-conflict volumes. However, StanChart notes that all exports that can be diverted from the Strait of Hormuz have already been, meaning no meaningful increases in global oil supplies are likely to be seen unless the blockade eases. To wit, Saudi Arabia is utilizing the temporary additional capacity in the East-West pipeline to raise transit volumes to the Red Sea to 7 mb/d.
StanChart now sees an oil price floor in the low-to-mid 70s thanks to the historic IEA release of oil from strategic reserves. A week ago, the IEA announced a record-setting release of 400 million barrels of oil from strategic reserves of 32 member countries, the largest in its history.
The release far exceeds the 182-million-barrel release announced back in 2022 after Russia invaded Ukraine. StanChart notes that such releases are a double-edged sword–adding more product to the market over time, while at the same time raising concerns that market conditions are grave enough to warrant such a drastic move. The analysts say the structural demand generated by the necessity to replenish these resources in the future can establish an oil price floor.
Related: How China’s Rare Earth Ban Backfired into a U.S. Tech Breakthrough
On the natural gas front, European natural gas futures held above €50/MWh on Tuesday, nearly 30% above their 12-month average, following major disruptions in gas flows. Two weeks ago, QatarEnergy halted liquefied natural gas (LNG) production and declared force majeure following drone strikes by Iran on facilities in Ras Laffan and Mesaieed. The disruption effectively cut off 77 million tonnes per annum (Mtpa) of LNG capacity, immediately triggering a global spike in gas prices as buyers scrambled to seek alternative supplies.
The cessation of tanker traffic through the Strait of Hormuz has cut off approximately 20% of global LNG supply. StanChart says the disruption has exposed the structural vulnerability of the Gulf, with Qatar profoundly vulnerable to future disruptions. That’s the case because nearly all of its LNG exports originate from Ras Laffan, and this gas must pass through the Strait of Hormuz–a narrow maritime choke point–in order to reach international markets.
Replacing Qatari LNG is currently impossible in the short term, leading to heightened volatility in gas markets. Consequently, large LNG importers in Asia are actively rebalancing their power generation mix toward coal and nuclear to manage limited LNG supplies, reduce reliance on the volatile spot markets, and maintain energy security.
China is focusing on domestic gas production after a pullback from the spot market in 2025, ramping up pipeline imports (particularly from Russia), and boosting coal and nuclear production in a bid to reduce reliance on imported LNG. China holds the largest number of long-term LNG contracts in the world.
Similarly, Japanese utilities are prioritizing coal-fired generation and increasing nuclear reactor restarts to preserve gas inventories, with some operators running coal plants much closer to full capacity compared to gas units. Japan’s long-term plan aims to maximize nuclear power, aiming for a 20% share by 2040. Further, South Korea is lifting constraints on coal-fired power generation and raising nuclear utilization to 80% to cope with surging energy costs.
By Alex Kimani for Oilprice.com
More Top Reads From Oilprice.com
