Investment Rating - The report raises Brent price forecasts by up to $10/bbl, reflecting a justified risk premium of approximately $10/bbl due to geopolitical uncertainties [5][45]. Core Insights - The report outlines three potential scenarios for future oil prices amid increased military activity between Israel and Iran, with the majority of probability concentrated in scenario 1, which suggests no disruption to oil supply [8][43]. - Scenario 1 predicts Brent prices could decline back to around $60/bbl if oil exports from the region remain unaffected [15][21]. - Scenario 2 anticipates a sharp reduction in Iran's exports, potentially leading to a balanced market with prices around $75-80/bbl [22][28]. - Scenario 3 considers the risk of wider supply disruptions, which could push prices to $120/bbl, but this scenario is viewed as an outlier [30][36]. Summary by Sections Price Forecasts - The new Brent price forecasts for 2Q25, 3Q25, and 4Q25 are $72.5, $67.5, and $65.0 respectively, reflecting significant upward revisions from previous estimates [6][49]. - The report indicates that the risk premium may dissipate over time, with a long-term forecast of $60/bbl for 2H26 [45][49]. Scenarios Analysis - **Scenario 1**: Military conflicts do not disrupt oil supply, leading to a potential price drop to ~$60/bbl if Iran's oil infrastructure remains intact [15][21]. - **Scenario 2**: A decline in Iran's exports could balance the market, with prices expected to stabilize around $75-80/bbl [22][28]. - **Scenario 3**: Significant supply disruptions could necessitate demand destruction, potentially raising prices to $120/bbl, although this is considered less likely [30][36]. Market Dynamics - The report notes that Brent prices have rallied approximately 7% following recent geopolitical events, indicating a shift in market sentiment [9][11]. - The disappearance of contango in the 2026 forward curve suggests that market participants no longer anticipate oversupply, reflecting a more bullish outlook [11][12]. Supply and Demand Balance - The current oil liquids supply/demand model forecasts a surplus of ~1.3 mb/d in 2026, with a smaller surplus of 0.8 mb/d when considering only crude oil [26][27]. - If Iran's oil exports were to decline significantly, the expected global surplus could be eroded, leading to a more balanced market [27][28].