Brent swings from $107 to $101 as banks raise 2027 forecasts

Oil's de-escalation trade lasted less than a day. ICE Brent settled 7.6% lower on Monday 2 November, back below $105 a barrel, as traders bet on US-Iran talks to reopen the Strait of Hormuz². Hours later, US forces struck targets on Iran's Qeshm Island inside the strait⁷.

By mid-morning in New York on Tuesday 3 November, Brent had climbed above $107, dropped briefly below $101 and was down 0.9% at $103.80¹. UK gas rose back above 240 pence a therm after falling more than 8% on Monday⁸. Buyers still face the same task as on Monday: set 2027 fuel and freight budgets on a price close to double last year's.

Why Monday's fall did not hold

Monday's fall came after a 14% rally in Brent in October that took the benchmark to a six-month high⁹. The December contract expired on Friday at $117.64 a barrel¹⁰. Over the weekend, Iran's president said the supreme leader had given the government more authority to negotiate with the US². Trump answered "no" when asked whether he would strike Iran after the midterms². Brent settled below $105².

The strikes came overnight. US officials described them as limited and defensive. They hit missile batteries used to fire on US aircraft after an IRGC attempt to shoot down a US fighter with a surface-to-air missile, the Wall Street Journal reported¹¹. Centcom confirmed the operation⁷.

Iran's deputy foreign minister, Kazem Gharibabadi, said: "We are still in a state of war. The aggression against Iran has not ended in our view, and until the military aggression is completely and permanently terminated Iran has the right to legitimate defence."⁷

He added that Iran would not tie its policy to other countries' elections⁷.

Where prices actually sit

EIA's spot Brent assessment was $123.10 a barrel on 27 October, against $65.52 a year earlier, a rise of 87.9%. The 52-week high is $138.21, set on 7 April¹². Spot WTI was $103.37 on 27 October, against $62.13 a year earlier¹³.

Tuesday's $103.80 is far above any pre-war benchmark. The strait is also not normal. Oil flows through Hormuz, including offshore transfers, are at about 82% of pre-war levels¹⁴. About 40% of the region's crude exports bypassed the strait by September¹⁴.

Banks raise 2027, they do not cut it

Goldman Sachs lifted its December 2026 Brent forecast to $105 from $90 and its 2027 average to $88 from $80, with WTI averaging $78 against $73, in a note dated 1 November^3, 9. The same note put another Brent forecast at $94, up from $81³. Goldman said a risk premium of about $27 a barrel "now explains most of October's crude price rally"³.

Goldman tied this to politics. The Polymarket-implied probability that the US-Iran ceasefire ends through escalation rises from 10% before the midterms to about 50% by 15 November and about 75% by year-end, it said³. Its base case still sees prices falling below forwards³. It also set out an upside case of $130 average in 2027 and $140 Brent if Gulf output stays 3.5 million barrels a day below the 2025 average. Its downside case is the $60s³.

UBS now sees Brent at $110 at year-end, up from $100, at $95 in March 2027, $90 in June and $85 in September. It counts at least 30 attacks on ships around Hormuz in October, the highest monthly number on record¹⁵.

Against $65.52 spot a year ago¹², those 2027 numbers assume no return to pre-war prices. Goldman also noted that December 2027 and December 2028 Brent futures have risen, a sign that markets see a risk of persistent weakness in regional exports³.

The premium is already in freight

The pass-through has started, but in freight and insurance rather than container surcharges. Goldman puts the global average crude freight rate above $20 a barrel, against $3 a year ago⁴. The war-risk premium for crossing Hormuz is $7 a barrel. Ship-to-ship transfers add $4, higher marine fuel $4, inefficient tanker allocation $3 and restrictions on the Iranian fleet $2⁴.

The IEA put Gulf-to-Asia crude shipping above $37 a barrel, over five times pre-war levels, or more than $74 million for a 2 million-barrel VLCC cargo¹⁴. UBS puts Middle East to China tanker freight at $30 to $40 a barrel, against $1 to $3 over the previous decade¹⁵.

On the container side, public notices published since 28 October show no new Gulf war-risk line. CMA CGM's newest war-risk surcharge is for the Black Sea, at $35 per TEU from 9 November, after the Joint War Committee designated that area a war-risk zone on 16 September⁵. Maersk cut its Italy intermodal fuel fee to 17% from 18% for movements priced from 1 November, and reviews the level monthly⁶.

That is the lag. Bunker adjustment factors move on reset dates, and shippers this year rushed cargo ahead of a 1 July bunker adjustment factor reset¹⁶. Air cargo shows the same gap: fuel prices were up 111% year on year in the final week of September, against a 26% rise in global air cargo yields¹⁷.

The two-day window

Iran has offered to lift its blockade of the strait within two days of the US lifting economic constraints: US steps on day one, shipping resuming on day two^7, 18. Tehran also wants frozen funds released, oil waivers restored and a shipping route designated with Oman recognised¹⁸. Its security chief, Mohsen Rezaei, has said Iran will not reopen Hormuz before its conditions are met¹⁸. Mediators say it will be clear within two days whether a basis for continued indirect talks exists⁷.

Traffic is managed, not free. Hormuz handled 17 ship transits a day on 24 and 25 October, including six VLCCs on 25 October¹⁹. The US naval command told vessels with no need to transit to stay well clear, and others to plan extra time for blockade enforcement²⁰. Centcom says its blockade has redirected 144 commercial ships¹⁸. On Monday, an Indian dhow was hit off Limah, Oman, and one crew member died¹¹.

What to watch

• The midterm result, and whether Washington acts on post-election strike threats; Trump has said the US might "have to go after Pickaxe Mountain"⁷.
• A formal Hormuz reopening sequence, and whether sanctions relief is actually offered¹⁸.
• The $7 a barrel Hormuz war-risk premium in freight⁴, and whether it eases before it reaches container surcharges.
• Whether the risk premium unwinds if the midterms pass with neither strikes nor a deal¹⁰.