Renewed escalating conflict in Iran and the Middle East has pushed Brent crude oil back up towards the $80/bbl (barrel) handle.

We think it is premature to expect $100/bbl as an important red line has yet to be crossed (and hopefully will not be crossed). Specifically, Iran has not openly targeted energy facilities across the Gulf and nor have they openly targeted oil tankers plying the region. The Gulf States have urged Iran to exercise restrain and return to the negotiation table.

In addition, OPEC still has dry powder attributed to the previous production cuts from 2023. There is room for both OPEC and specifically, Saudi Arabia, to ramp up production if necessary to dampen any excessive spike in energy price.

Overall, we raise our Brent crude oil forecast to $80/bbl in Q2 and Q3/2026,followed by $70/bbl in Q4/2026 and Q1/2027.

This latest Iran crisis has reinforced and amplified the safe haven need for gold as well. As such, we raise our positive gold forecast further to $5,400/oz in Q2/2026, $5,600/oz in Q3/2026, $5,800/oz in Q4/2026 and $6,000/oz in Q1/2027.

Following the dramatic escalation of conflict in Iran and the Middle East across the weekend, Brent crude oil opened this new week in Asia with a brief spike to about $82/bbl before drifting back down to $76/bbl by Asia mid-morning.

Brent crude oil had started the year at the $60/bbl handle and has steadily climbed higher to above $70/bbl last week as the renewed drum beats of war in the Middle East grew louder. The current spike to $76/bbl represents a 4% move higher from last Friday’s (27 February) close of about $73/bbl.

With the renewed offensive by U.S. and Israel on Iran and the retaliation by Iran on regional Gulf States, there are widespread concerns that Brent crude oil will spike now towards the $100/bbl.

Our view is that it is premature to expect $100/bbl at this stage as energy markets are now amply supplied and the dynamics are vastly different from when Russia first invaded Ukraine in February 2022.

The important red line has not been crossed (and hopefully will not)

Latest escalation in conflict in Iran and the Middle East is decidedly more serious than the relatively brief missile strike by the U.S. on Iran’s nuclear facilities last June. Iran has now retaliated by selective targeting of U.S. related military assets across various Gulf States. Regional airhubs, including Dubai’s key international airport, are now closed, disrupting regional air travel and cargo shipment.

Many shipping lines have chosen out of an abundance of caution to stop shipping across the Straits of Hormuz as well. While there is no official statement from Iran on the closure of the Straits of Hormuz (and there probably will not be), news reports confirm a backup of oil tankers on both sides of the Straits of Hormuz at both the Persian Gulf and the Gulf of Oman.

Despite the above-mentioned alarming escalation of events, it is important to note that a particularly important red line has not been crossed. Despite the dramatic escalation of conflict, Iran has yet to openly target energy facilities across the region nor openly target the oil tankers plying the Gulf. This is an important red line if crossed, may truly disrupt energy shipment across the Gulf and trigger a further spike in Brent crude oil towards the $100/bbl level.

In particular, there are signs to suggest restraint on Iran’s part due to risk of further isolation amidst the widening regional conflict. The Gulf States have issued strong statements against Iran, urging de-escalation, warning Iran that “your war is not with your neighbors” and reserving their right for defense. If necessary, the Gulf States and U.S. can help provide armed escorts for the various oil tankers to help mitigate the risk of shipping across the Strait of Hormuz.

OPEC still has dry powder

Across the weekend (March 1), in a scheduled meeting, OPEC announced that they will raise crude oil production by 206,000 bpd (barrels per day) in April. Previously, prior to this latest escalation of conflict in Iran, the consensus expectation was for OPEC to raise production by 135,000 bpd.

While OPEC’s measured response is met in some quarters with some disappointment, it is important to note that overall, OPEC has returned about 1.65 million bpd of production volume compared to their “voluntary adjustment” or production cut of 2.2 million bpd from 2023. In other words, OPEC still has ample dry powder to ramp up production if necessary.

OPEC’s weekend statement highlighted this in very clear terms noting that “the countries will continue to closely monitor and assess market conditions, and in their continuous efforts to support market stability, they reaffirm the importance of adopting a cautious approach and retaining full flexibility to increase, pause or reverse the phase out of the previously implemented voluntary adjustments of 2.2 million barrels per day announced in November 2023”.

Overall, near term risk of elevated Brent crude oil prices at $80/bbl. But premature for $100/bbl

Overall, as discussed above, while we note near term risk of Brent crude oil price at the $80/bbl handle, potential de-escalation as well as ample supply from OPEC will dampen any excessive surge in crude oil price.

Our updated quarterly forecasts are $80/bbl for Q2/2026 and Q3/2026, followed by $70/bbl for Q4/2026 and Q1/2027. It is premature to expect a spike in energy prices to $100/bbl at this stage. Previous forecast was $75/bbl for Q1/2026, $70/bbl for Q2/2026 and $65/bbl for Q3/2026 and Q4/2026.

Our latest technical outlook suggests that a long-term low in Brent crude oil price is in place. A weekly close above $75.2/bbl would increase the probability of Brent remaining above the $80/bbl level in the coming months.

Raising our positive forecast for gold further to $6,000/oz by Q1/2027 as this latest Iran conflict will further amplify and reinforce safe haven investor needs

Prior to this escalation of conflict in the Middle East, gold was consolidating at the $5,000/oz level after the heavy bouts of profit taking at the end of January from $5,500/oz to $4,600/oz.

On Monday (March 2) morning, gold traded back up above $5,300/oz. Despite near term elevated volatility, the long-term safe haven needs for gold remain intact. Global central banks continue their strong reserve allocation into gold while retail investors continue their strong purchases of gold bullion. This latest round of escalation of conflict with Iran will further reinforce and amplify investors’ safe haven needs.

As such, we maintain our positive outlook for gold and update our quarterly forecasts further to $5,400/oz by Q2/2026, $5,600/oz by Q3/2026, $5,800/oz by Q4/2026 and $6,000/oz by Q1/2027. Previous forecast was $4,800/oz by Q1/2026, $5,000/oz by Q2/2026, $5,200/oz by Q3/2026 and $5,400/oz by Q4/2026.

Investors will be on the lookout for pass-through of higher energy prices leading to renewed inflation risks in US

Needless to say, a higher Brent crude oil price around $80/bbl risks makes near term inflation a bit sticky as well. Questions will be asked at upcoming FOMC meeting as to the pass-through risk of higher energy prices on U.S. inflation outlook. For now, we retain our view of two more 25 bps rate cuts by the Fed in June and in Q3. But investors will be on heightened lookout for risk of either further delay in Fed rate cut timing or even increasing difficulty for the Fed to cut in the second half of the year.

In the currency space, the USD opened marginally higher this morning, with the USD Index (DXY) rising by about 0.2 to 97.80. While further risk aversion may provide a short-term squeeze higher for the USD, the long term trajectory remains negative unless the Fed were to signal renewed inflation risk and reluctance to cut rates further later this year.

A key proxy for higher pass-through inflation risk in the U.S. is gasoline price in the U.S. This is a key proxy that investors including the White House follow closely. It will be particularly sensitive ahead of the mid-term election should gasoline prices rise above the $4/gallon level, back higher towards $5/gallon.