Bank of America Warns Oil Prices Could Exceed $150 Due to Hormuz Disruptions
Bank of America commodity chief Francisco Blanch stated in a client report that if supply disruptions caused by the Iran conflict continue until spring 2027, or if damage to oil infrastructure worsens, ICE Brent near-month contracts may need to rise significantly above $150 per barrel to curb global demand. The bank also raised its Brent year-end forecast from $83 to $95.
Blanch wrote that damaged facilities and geopolitical tensions make it difficult for supply to quickly return to normal. The Strait of Hormuz remains constrained, with over 100 oil tankers passing daily before the conflict, now reduced to about two per day. This waterway accounts for about 20% of global crude oil transport. In the bank's scenario, ongoing tensions correspond to an average price of about $95 for the year, prolonged conflict to about $120, and significant damage to key facilities pointing to $150.
He specifically mentioned alternative routes like Saudi Arabia's east-west pipeline: if cut for an extended period, prices could rise to a new level from the current stage. The function of $150 is clearly defined as demand destruction—forcing consumption to shrink through high prices rather than immediately filling the gap with increased production. A historical comparison is the demand collapse that occurred when Brent reached nearly $148 in 2008.
During the conflict, Brent has surged several times: reaching about $124 to $126 around April, then sharply dropping on ceasefire rumors, and returning above $100 with renewed fighting. Tracking shows there is still about 10 million barrels per day of missing exports. Bank of America previously estimated about 11 million barrels per day of production capacity in the region is offline, with restarts requiring special teams, pressure testing, and certification, not just a two-week ceasefire. The pre-conflict surplus of about 400 million barrels has been wiped out.
In market mechanisms, this is scenario pricing rather than spot transactions: buyers are refineries and airlines needing insurance against disruptions, while sellers are producers in the Americas and some non-Gulf crude. Funds are flowing from importing countries into tanker war insurance, alternative crude, and defense stocks related to drilling/air defense. Beneficiaries are shale and Atlantic basin producers; those under pressure are Asian refinery profits, inflation expectations in Europe and the U.S., and the petrochemical chain reliant on the Strait. The event-driven aspect is that the report identifies "dragging into next spring" as a trigger, with continued inventory declines as a prerequisite.
For near-month contracts to rise to $150, it means paper goods abandon the optimism of "quick resumption of shipping" to align with already more expensive physical goods.
Source: Public Information
ABAB AI Insight
Bank of America’s commodity desk has shifted its oil price forecast from a single-point estimate to a war duration function: the adjustment from $83 to $95 is a baseline upgrade, while $150 serves as a penalty for "surviving the winter of disruptions." Blanch's approach is consistent—first assessing the tonnage through the Strait, then checking if alternative pipelines are still operational, and finally allowing prices to execute demand destruction. This follows the same logic as the 2022 European gas prices that halted factories using spot prices, only the commodity in question is now the crude oil calendar from Hormuz.
The capital route is selling geopolitical timelines to the futures curve: near-month contracts absorb disruptions, while far-month contracts still bet on resumption, leading to a situation where paper goods are priced lower than physical goods. Money flows from consuming countries to subsidize war insurance and detours, entering crude oil that can be loaded immediately from the Western Hemisphere. The motivation is to avoid reassuring clients with a "mean reversion to $70 to $80" when inventories are at a low. Resource mobilization relies on raising year-end targets while framing $150 as a contingent clause, rather than opening a new long recommendation.
The analogy is to the Gulf War in 1990, which saw rapid fluctuations within two months, and the demand destruction in 2008 that crashed oil prices from high levels. The current situation resembles the latter as a semi-finished product: the inventory cushion has been consumed by war, and resumption cannot be measured weekly. The industry phase shifts from risk premium to controlling physical balance—whoever can fill a 10 million barrels per day gap will have pricing power; the speed of shale production increases determines whether $150 is a threat or a settlement price.
Structural judgment indicates a transfer of pricing power. The mechanism is that once the Strait shifts from a channel to a bottleneck, prices will no longer be determined by OPEC meetings but by "how many weeks of inventory are left and how many days the alternative pipelines can hold out." $150 serves as a switch for Asian import demand to self-reduce; if the switch is activated, inflation and interest rate expectations will change before oil company profits do.
ABAB News · Law of Cognition
- If disruptions drag through one winter, prices will shift to execute production cuts.
- Paper goods are optimistic, while physical goods settle based on supply interruptions.
- Once alternative pipelines are cut, the Strait premium becomes a facility premium.