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Middle East crisis, damaged energy infrastructure, and OPEC supply discipline could raise oil prices.
Higher refining costs, uneven refinery recovery and slightly softer demand may keep oil prices high in 2027.
The year 2026 can easily be tagged as a year of oil. United States Brent Oil Fund LP (BNO - Free Report) hassurged this year by 133.5% (as of Nov. 2, 2026) due to Middle East tensions. The ongoing conflict involving the United States, Israel and Iran has disrupted the oil-rich Middle East.
Tehran’s near-total closure of the Strait of Hormuz has severely restricted global energy flows. If the Strait remains fully closed for long, oil prices may rise sharply to rebalance markets. Repeated diplomatic efforts to end the conflict have not come to fruition yet.
Against this backdrop, Washington attacked Iran’s Qeshm Island on Monday, U.S. officials told The Wall Street Journal, adding that the United States has been carrying out “limited strikes” against the country in recent weeks, as mentioned on CNBC.
Below we highlight three reasons why oil prices could remain elevated in 2027.
Hit to the Energy Infrastructure
The trajectory from here hinges on how long the disruption lasts and how much physical damage happens to the energy infrastructure. Even if the Iran war ends, the hit to the energy infrastructure cannot be fixed quickly.
According to Jim Krane, a fellow in Middle East Energy Studies at Rice University’s Baker Institute, there have been direct attacks on multibillion-dollar infrastructure that’s going to take as long as five years to fix.
This is likely to keep a significant portion of global liquefied natural gas supplies off the market for a long time, per The Hill, as reported by Yahoo Finance, earlier in the year.
OPEC Production Discipline to Begin in 2027?
The OPEC output decision currently reflects a balancing act between near-term supply disruptions and longer-term concerns about oversupply.
Seven members of the group completed the rollback of a 1.65 million-barrel-per-day voluntary production cut (first agreed in 2023) in September 2026. Yet, another layer of roughly 2 million bpd cuts remains in place through the end of 2026, per Reuters, as quoted on CNBC.
Major Banks See Oil Prices Staying Elevated
Goldman Sachs has raised its December 2026 Brent crude price forecast to $105 per barrel from its earlier estimate of $90. The revised outlook represents an increase of nearly 17%, reflecting growing concerns about global supply security, as reported by Bloomberg, quoted on oilprice.com.
Next year, Goldman’s analysts expect Brent crude to average $88 per barrel, up from $80 per barrel in its previous forecast. Goldman is not alone in taking a more bullish view of oil prices. Several major financial institutions have also raised their forecasts.
ANZ's commodity analysts recently lifted their December 2026 Brent forecast by 10% to $105 per barrel. UBS expects Brent to reach $110 per barrel by year-end, as quoted on oilprice.com.
ANZ analysts noted that eight months of adapting to disrupted Middle Eastern supplies have weakened the buffers that initially helped the market absorb the shock.
Oil Demand for 2027 to Stay Slightly Below 2025 Levels
Per the IEA, there could be a partial recovery in global oil demand, which is expected to remain 620,000 barrels per day (bpd), or 0.6%, below the 2025 levels in 2027. The Iran war is disrupting fuel availability, pushing up energy costs and weakening economic activity.
Uneven Refinery Recovery in 2027?
Meanwhile, global refinery runs are projected to fall by 2.3 million bpd to 81.7 million bpd in 2026 before rebounding by 2.8 million bpd in 2027. This combination of elevated refining costs and an uneven recovery in refinery activity could keep oil markets volatile, and prices elevated in 2027.
ETFs in Focus
Against this backdrop, investors should closely track energy exploration ETFs like State Street Energy Select Sector SPDR ETF (XLE - Free Report) , iShares US Oil & Gas Exploration & Production ETF (IEO - Free Report) , Invesco Energy Exploration & Production ETF (PXE - Free Report) and MLP ETFs like Alerian MLP ETF (AMLP - Free Report) . AMLP ETF yields as high as 7.72% annually. If the Iran conflicts end soon, these ETFs are likely to fall along with oil prices, but are unlikely to return to the pre-war level.
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5 Reasons Why Oil Prices May Stay Strong in 2027
Key Takeaways
The year 2026 can easily be tagged as a year of oil. United States Brent Oil Fund LP (BNO - Free Report) hassurged this year by 133.5% (as of Nov. 2, 2026) due to Middle East tensions. The ongoing conflict involving the United States, Israel and Iran has disrupted the oil-rich Middle East.
Tehran’s near-total closure of the Strait of Hormuz has severely restricted global energy flows. If the Strait remains fully closed for long, oil prices may rise sharply to rebalance markets. Repeated diplomatic efforts to end the conflict have not come to fruition yet.
Against this backdrop, Washington attacked Iran’s Qeshm Island on Monday, U.S. officials told The Wall Street Journal, adding that the United States has been carrying out “limited strikes” against the country in recent weeks, as mentioned on CNBC.
Below we highlight three reasons why oil prices could remain elevated in 2027.
Hit to the Energy Infrastructure
The trajectory from here hinges on how long the disruption lasts and how much physical damage happens to the energy infrastructure. Even if the Iran war ends, the hit to the energy infrastructure cannot be fixed quickly.
According to Jim Krane, a fellow in Middle East Energy Studies at Rice University’s Baker Institute, there have been direct attacks on multibillion-dollar infrastructure that’s going to take as long as five years to fix.
This is likely to keep a significant portion of global liquefied natural gas supplies off the market for a long time, per The Hill, as reported by Yahoo Finance, earlier in the year.
OPEC Production Discipline to Begin in 2027?
The OPEC output decision currently reflects a balancing act between near-term supply disruptions and longer-term concerns about oversupply.
Seven members of the group completed the rollback of a 1.65 million-barrel-per-day voluntary production cut (first agreed in 2023) in September 2026. Yet, another layer of roughly 2 million bpd cuts remains in place through the end of 2026, per Reuters, as quoted on CNBC.
Major Banks See Oil Prices Staying Elevated
Goldman Sachs has raised its December 2026 Brent crude price forecast to $105 per barrel from its earlier estimate of $90. The revised outlook represents an increase of nearly 17%, reflecting growing concerns about global supply security, as reported by Bloomberg, quoted on oilprice.com.
Next year, Goldman’s analysts expect Brent crude to average $88 per barrel, up from $80 per barrel in its previous forecast. Goldman is not alone in taking a more bullish view of oil prices. Several major financial institutions have also raised their forecasts.
ANZ's commodity analysts recently lifted their December 2026 Brent forecast by 10% to $105 per barrel. UBS expects Brent to reach $110 per barrel by year-end, as quoted on oilprice.com.
ANZ analysts noted that eight months of adapting to disrupted Middle Eastern supplies have weakened the buffers that initially helped the market absorb the shock.
Oil Demand for 2027 to Stay Slightly Below 2025 Levels
Per the IEA, there could be a partial recovery in global oil demand, which is expected to remain 620,000 barrels per day (bpd), or 0.6%, below the 2025 levels in 2027. The Iran war is disrupting fuel availability, pushing up energy costs and weakening economic activity.
Uneven Refinery Recovery in 2027?
Meanwhile, global refinery runs are projected to fall by 2.3 million bpd to 81.7 million bpd in 2026 before rebounding by 2.8 million bpd in 2027. This combination of elevated refining costs and an uneven recovery in refinery activity could keep oil markets volatile, and prices elevated in 2027.
ETFs in Focus
Against this backdrop, investors should closely track energy exploration ETFs like State Street Energy Select Sector SPDR ETF (XLE - Free Report) , iShares US Oil & Gas Exploration & Production ETF (IEO - Free Report) , Invesco Energy Exploration & Production ETF (PXE - Free Report) and MLP ETFs like Alerian MLP ETF (AMLP - Free Report) . AMLP ETF yields as high as 7.72% annually. If the Iran conflicts end soon, these ETFs are likely to fall along with oil prices, but are unlikely to return to the pre-war level.