Investors trying to assess how close the U.S. and Iran are to some sort of peace agreement can expect two scenarios to play out regarding oil, according to Bank of America Securities. Oil prices have fallen in recent days on expectations that some kind of memorandum of understanding will be signed between the two countries. Brent crude oil futures, the international benchmark, fell to about $94 per barrel this week, while U.S. crude oil futures fell to about $89 per barrel. However, recent US attacks on Iran have reignited concerns that the conflict in the region could accelerate, sealing off the Strait of Hormuz and raising oil prices. On Thursday, Brent crude oil futures were hovering around $97 per barrel, while WTI crude oil futures were above $91 per barrel. Bank of America Securities outlined two possible outcomes for the next base scenario. A peace deal leading to the full reopening of the Strait means that Brent crude oil futures prices in 2026 will average $82 per barrel. A peace deal that only leads to a partial reopening of Hormuz, a return to 50% to 75% of pre-war levels by the end of the year, could mean Brent oil prices will average just $103 a barrel this year. “The question is whether the strait is fully or partially reopened. Inventories are providing most of the cushion for now and could fall below 2022 levels by the fourth quarter of 2026 if the Hormuz closure continues,” Francisco Branch, commodity derivatives strategist at Bank of America Europe, said on Wednesday. The strategist said he does not expect Brent oil prices to collapse to pre-war levels, saying he is holding steady at this year’s average base price for Brent crude oil futures at $92.50 a barrel. He expects demand for oil barrels to surge and prices to rise over the next 18 to 24 months once the strait reopens.
