Core Viewpoint - Oil prices increased following an Israeli military attack on Hamas leadership in Doha, Qatar, but gains were limited due to assurances from the U.S. and Qatar against further escalation in the region [1][2][3] Oil Price Movements - Brent crude futures rose by 37 cents (0.6%) to $66.39 per barrel, while U.S. West Texas Intermediate crude futures also increased by 37 cents (0.6%) to $62.63 per barrel [1] - Both benchmarks initially gained nearly 2% after the attack but later lost most of those gains [2] Geopolitical Context - The U.S. and Qatar have expressed a desire to avoid further escalation, and the muted response from other Gulf Cooperation Council members suggests that the risk of a broader regional conflict is contained [3] - Geopolitical risk premiums are currently easing rather than increasing [3] Supply and Demand Factors - The attack did not lead to immediate supply disruptions, which contributed to the paring of oil price gains [4] - Oil prices were already supported by a smaller-than-expected increase in OPEC+ output, expectations of continued oil stockpiling by China, and concerns over potential new sanctions against Russia [4] Market Sentiment - The U.S. Energy Information Administration anticipates significant pressure on global crude prices in the coming months due to rising inventories [5] - Physical oil markets are showing signs of weakness, with prompt spreads in the Atlantic basin weakening, indicating weak demand [5] Inventory and Economic Indicators - U.S. crude oil inventories reportedly rose last week, as per the American Petroleum Institute [6] - Traders are anticipating a potential interest rate cut by the Federal Reserve, which could stimulate economic growth and increase oil demand [7]

Geopolitical Risk & Oil Market Impact - The market is pricing in a significant geopolitical risk premium of approximately $10-12 per barrel, representing about 15-20% of the total crude oil price [3][6] - The Strait of Hormuz is identified as a key chokepoint, and any disruption there could lead to a potentially large oil supply disruption [2][3] - While Iran's oil production isn't currently targeted, its continued flow and Saudi Arabia's potential to compensate are crucial factors [4] Oil Market Dynamics & Outlook - OPEC+ moving to return barrels is a key factor influencing market sentiment and limiting fresh long positions [4] - Many analysts previously forecasted lower prices ($40-50), but the firm's 12-month Brent forecast remains at $65, indicating a medium-to-long term bearish outlook from current prices [4] - Short-term bullish catalysts exist, but investors require a positive medium-to-long term outlook to sustain long positions [4] Oil Consumption & Economic Impact - Oil consumption as a share of GDP has decreased, particularly in the US due to its shift towards a service-based economy [6] - Despite the decline in oil intensity, the US still directly consumed approximately $650 billion worth of oil last year, highlighting the significant economic impact of price fluctuations [7] - A 10% price move in oil translates to a $60 billion impact on US oil consumption [7]

Investment Rating - The report indicates a higher geopolitical risk premium in the near term but maintains an unchanged forecast for 2026 oil prices [5][26][29] Core Insights - Brent oil prices have increased by 12% to $74 per barrel due to escalating tensions in the Middle East, particularly Israeli strikes on Iran's nuclear program [4][5] - The forecast predicts Brent and WTI prices will decline to $59 and $55 per barrel in Q4 2025, and to $56 and $52 per barrel in 2026, assuming no disruptions to oil supply [5][29] - Two alternative scenarios are considered for potential price impacts: one involving damage to Iran's export infrastructure leading to a peak Brent price of over $90 per barrel, and another considering broader regional disruptions that could push prices above $100 per barrel [20][24] Summary by Sections Price Forecasts - The report adjusts the Brent price forecast for Q3 2025 to $63 per barrel from $61, while maintaining a long-term forecast of $56 for 2026 [5][29] - The report outlines a detailed forecast for Brent and WTI prices across various quarters, indicating a gradual decline in prices through 2026 [29] Geopolitical Risks - The report highlights the increased geopolitical risks due to recent events in the Middle East, which could lead to short-term price volatility [6][26] - It emphasizes that while the geopolitical risk premium may normalize if oil supply remains stable, the current situation has heightened uncertainty [6][26] Iranian Oil Infrastructure - The report estimates Iran's crude production at 3.6 million barrels per day (mb/d) and discusses the potential impact of damage to its oil infrastructure on global energy prices [7][16] - It notes that damage to upstream or midstream assets would have a more significant impact on prices compared to downstream assets [7][16] Scenarios for Price Upside - The first scenario considers a reduction in Iranian production by 1.75 mb/d for six months due to infrastructure damage, with a subsequent recovery [17][20] - The second scenario examines risks to regional trade routes and potential disruptions in the Strait of Hormuz, which could significantly affect global oil prices [23][24]