SC Says No Clear Off-Ramps in Conflict, Ups Brent Forecast

Despite optimistic comments from the U.S. about the potential duration of the conflict, there appear to be no clear off-ramps at present.

That’s what Standard Chartered Bank Energy Research Head Emily Ashford said in a report sent to Rigzone late Monday, adding that “Iran seems determined to continue constraining transit through the Strait of Hormuz, and attacking military, transportation, and energy infrastructure, including ports, refineries, oil fields, and vessels across the region”.

“It has been an extraordinary three weeks for the energy complex,” Ashford said in the report.

“Brent crude traded in its widest ever one day range, over $35 per barrel on 9 March, to a 26-month high of $119.50 per barrel, before falling back to oscillate around $100-105 per barrel,” Ashford added.

“We raise our price forecasts to reflect a prolonged disruption to the energy complex with a longer tail than previously expected,” Ashford continued.

“We increase our average Brent price forecast for 2026 to $85.50 per barrel (from $70.00 per barrel), Q1-2026 to $78.00 per barrel (from $74.00 per barrel) and Q2-2026 to $98.00 per barrel (from $67.00 per barrel),” the Standard Chartered Bank Energy Research Head went on to state.

Rigzone asked Ashford how Standard Chartered’s oil price projections for 2026 and 2027 would change if the conflict ended today. In response, Ashford told Rigzone that her pre-conflict price forecasts were in the mid $60s per barrel for 2026, “rising slightly in 2027”.

“I think even if the conflict ended rapidly, it has exposed the structural vulnerability of Gulf production, and highlighted the geographic concentration of OPEC spare capacity. Plus there would be a logistics lag,” Ashford added.

“I think prices would remain in the mid $70s per barrel, pushing higher in 2027, and wouldn’t expect the price correction to be immediate, certainly not back to the pre-conflict levels,” Ashford said.

In the report, Ashford highlighted that Standard Chartered estimates that 7.4-8.2 million barrels per day of supply is currently offline.

Alleviation Measures

A variety of mechanisms have been announced to attempt to alleviate supply shortages and price escalations, Ashford noted in the report.

“On 11 March, members of the International Energy Agency (IEA) announced the largest strategic stock release ever, of 400 million barrels, although the market greeted the reserves release with little more than a shrug,” Ashford highlighted.

“Such releases are a double-edged sword – adding more product to the market (over time), and raising concerns that conditions are grave enough to warrant such a rare move,” Ashford warned.

“In addition, the structural demand generated by the necessity to replenish these resources in the future can establish a price floor, which we expect to be in the low-to mid $70s per barrel, circa $10 per barrel higher than pre-conflict fair value,” Ashford added.

The energy research head noted that the U.S. Treasury has issued a short-term sanctions waiver to allow purchases of Russian crude, “as long as it has already been loaded onto tankers (expanding the waiver from solely Indian consumers to all countries)”.

Ashford also highlighted that “the U.S. is considering a suspension of the Jones Act (also known as the Merchant Marine Act of 1920), which decrees that goods shipped between U.S. ports must be through vessels that are mostly U.S.-owned, U.S.-flagged and U.S.-built” but warned that “this limits vessel availability for domestic movements”.

The Standard Chartered Bank Energy Research Head went on to state that “perhaps the most contentious suggestion has been providing military escorts to tankers in the Strait of Hormuz”.

“There has been dialogue on the potential mining of the strait by Iran, with only a narrow channel close to the Iranian shore left free for transit, which would have a higher level of exposure to shore-based observation, interdiction and weaponry,” Ashford said.

“More substantial mining across the entire channel would restrict the vessels that are currently still allowed passage … Escorts do not appear a viable solution, at least under the current conflict conditions,” Ashford continued.

The energy research head warned in the report that, in the longer term, Standard Chartered expects to see “a notable focus on alternative export routes for Gulf oil and refined product producers”.

“However, since construction will be a long-term project, the structural vulnerability of the Gulf has been exposed, along with the geographical and logistical constraints of OPEC spare capacity,” Ashford added.

Rigzone has contacted the White House, the Iranian Ministry of Foreign Affairs, the General Secretariat of the Gulf Cooperation Council, and OPEC for comment on the Standard Chartered report and Ashford’s statement. At the time of writing, none of the above have responded to Rigzone.

Hormuz Traffic

In an oil flash note sent to Rigzone late Monday by Natasha Kaneva, J.P. Morgan’s head of global commodities strategy, analysts at the company, including Kaneva, said traffic through Hormuz “has thinned further and is now overwhelmingly Iranian – about 98 percent of observable flows – with exports averaging 1.3 million barrels per day in early March”.

“In parallel, Iran appears to be allowing select vessels to transit the Strait following verification. Over the past 48 hours, at least four vessels have exited via Hormuz with a brief diversion through the Larak–Qeshm Channel,” the analysts added.

“This is not a standard route for vessels and could reflect a process designed to confirm vessel ownership and cargo, enabling passage for ships that are not affiliated to the U.S. or its allies,” they continued.

“In practice, this creates a system in which the Strait is not formally closed, yet transit increasingly depends on political understandings with Tehran,” the analysts went on to warn.

Rystad Energy stated, in a market update sent to Rigzone on Tuesday, that the Middle East conflict “continues to escalate” and added that the Strait of Hormuz “remains effectively closed”.

“Base-case assumptions have shifted significantly, as the crisis risks leaving lasting scars on energy markets,” Rystad warned.

Oil Catches a Bid

In a market comment sent to Rigzone on Tuesday, Aaron Hill, Chief Market Analyst at FP Markets, said oil prices continue to drive market sentiment.

Hill flagged a “modest pullback in WTI and Brent taking shape yesterday, down 5.1 percent and 2.8 percent, respectively”. He added, however, that this “has offered little comfort to traders”.

“Both markets have caught a bid this morning following renewed retaliatory strikes from Iran,” Hill said.

“While WTI continues to struggle to find acceptance above $100 per barrel, Brent retested the psychologically important level and is trading around $104,” he added.

Hill highlighted in the comment that, “nearly three weeks into the U.S.-Israeli assault on Iran, the Strait of Hormuz … remains effectively closed”.

“U.S. President Donald Trump’s recent call for allies to send warships to help secure passage through the Strait has largely fallen on deaf ears,” he said.

“U.S. Treasury Secretary Scott Bessent was also on the wires recently, stating that some ships are making it through the Strait, which was the main cause of yesterday’s drop in oil prices. However, things are far from normal and oil prices are demonstrating this right now,” he added.

Rigzone has contacted the White House and the Iranian Ministry of Foreign Affairs for comment on the J.P. Morgan note, the Rystad update, and Hill’s comment. At the time of writing, neither have responded to Rigzone.

To contact the author, email andreas.exarheas@rigzone.com