The situation in Iran reshapes expectations, with the consensus on Wall Street that the price of oil will rise to $100 per barrel! However, the tug of war between "demand destruction" and "low inventory levels" creates uncertainty about reaching a ceiling.

The ongoing crisis in the Strait of Hormuz, lasting for nearly three months, is profoundly reshaping the global oil market landscape. A recent survey shows that an increasing number of market participants have reached a broad consensus - the average price of Brent crude oil over the next year will likely be anchored in the range of $81 to $100, with geopolitical risk premiums expected to persist for many years. However, at the same time, major Wall Street banks are quietly diverging in their short-term outlook: one side is betting that higher oil prices will trigger massive "demand destruction" to achieve market rebalancing, while the other side warns that the pace of supply deficits and inventory depletion is approaching a critical point. Demand Destruction: Core Mechanism for Market Rebalancing According to a survey of 126 asset managers and energy market experts conducted this month, the majority of respondents expect the average price of Brent crude oil over the next 12 months to fall in the $81 to $100 range, with nearly two-thirds believing that oil prices will carry a persistent risk premium of $5 to $15 per barrel over the coming years, but few expect this premium to exceed $20. The logic behind this assessment points to "demand destruction" - the survey ranks this mechanism as the most likely path to offset the supply deficit over the next year, prioritizing it over trade flow reshaping, OPEC+ policy adjustments, and strategic reserve releases. Most respondents expect global supply disruptions to range between 300,000 to 700,000 barrels per day, with few foreseeing disruptions exceeding 1,000,000 barrels per day. BI analysts Salih Yilmaz and Will Hares commented that this distribution implies that "geopolitical risks are seen as a lasting presence, but not a fundamental reset of the long-term price system." Respondents seem to assume that supply and demand will gradually rebalance, anchoring prices in a relatively stable range. Current market performance has confirmed the role of this logic in local markets - in the options market, bullish biases between WTI and Brent have narrowed to their lowest levels since the outbreak of the conflict, with hedge funds cutting long positions to levels seen concurrently, indicating that funds are shifting from chasing gains to managing volatility. Although U.S. shale oil is expected to increase production, most respondents believe that its growth rate is insufficient to substantially reshape supply and demand balance, with few expecting a significant increase or precipitous decline in production. Inventory Depletion at "Extreme Speed" However, regardless of how calm the market's expectations for the future may be, the current inventory situation is sounding a sharp alarm. Goldman Sachs analysts Yulia Zhestkova Grigsby and Daan Struyven recently pointed out in a report that since May, global visible crude oil inventories have been reduced at a record pace of 8.7 million barrels per day, almost twice the average since the outbreak of the conflict. About two-thirds of this reduction comes from a decrease in "crude oil in transit" - the decline in exports far exceeds the weakening of imports, with import declines spreading from Asia to Europe, and European aviation kerosene imports sharply down 60% from the 2025 average. The analysts at the bank said of the Strait of Hormuz, "the physical market is still tightening, with estimated oil exports through the strait at only 5% of normal levels." The strait is currently facing dual blockades from Iran and the U.S. The International Energy Agency's earlier monthly report confirmed this trend: global observable oil inventories have consumed around 246 million barrels from March to April. IEA Director Fatih Birol warned last week that global commercial crude oil inventories are rapidly shrinking, and even if the conflict were to end abruptly, the oil market would still be in a severe supply shortage until October. In the U.S., national crude oil inventories, which include strategic petroleum reserves, decreased by a record of 17.8 million barrels last week, as record exports began to deplete inventories; inventories at the Cushing delivery hub in Oklahoma continue to approach the operational bottom line. U.S.-Iran Dispute Continues, NATO Begins to Intervene On the geopolitical front, the U.S.-Iran standoff continues to solidify. According to the latest reports, U.S. President Trump stated on the 20th that he is not in a rush to end the conflict with Iran, saying that if the U.S. and Iran can reach an agreement, he would be willing to wait a few more days for messages from Iran. Although the day before, Trump had expressed a desire to "quickly" end the conflict with Iran, and signaled negotiations with Iran entering the "final stage," he also warned that he may have to launch a "severe attack" against Iran again. Iran, for its part, said that it is "assessing" the latest negotiating views passed on through Pakistan, while warning that any new attacks against the country would prompt them to expand the war beyond the Middle East. Earlier reports also indicated that a senior NATO official revealed that if the Strait of Hormuz remains closed until early July, NATO will consider "assisting ships" through the waterway, with several member countries expressing support, but not yet reaching a consensus. Meanwhile, Iranian media claimed that a sanctioned liquefied petroleum gas carrier had crossed the U.S. blockade line undetected. The conflict has now entered its 12th week, with over 1,000 ships and approximately 20,000 crew members stranded in the strait, and normal trade activities are nearly paralyzed. Wall Street Consensus and Divisions Regarding the outlook for oil prices, forecasts from major Wall Street institutions are gradually converging on a common judgment from the initial significant discrepancies: that oil prices will remain high in the medium to long term, but differences persist in the assessment of short-term upside potential. J.P. Morgan issued the most specific forecast in mid-May: even if the Strait of Hormuz reopens in June, the average price of Brent crude oil in 2026 is projected to reach $96 per barrel, with quarterly averages of $103 in the second quarter, $104 in the third quarter, and $98 in the fourth quarter. Natasha Kaneva, head of global commodities strategy at the bank, also issued a stern warning: if U.S.-Iran conflict escalates further, Brent crude oil could spike to $150, pushing U.S. inflation rates above 4%, forcing the Fed to delay interest rate cuts until 2027. According to her calculations, global oil supply disruptions reached 13.7 million barrels per day in April, accounting for about 14% of global demand. Goldman Sachs has raised its oil price forecast for the third time this year. In its latest baseline scenario in April, the fourth-quarter forecasts for Brent/WTI in 2026 were raised to $90/$83, further increasing to $85/$80 in 2027. Goldman particularly warned that "the current rate of inventory depletion is at an extreme historical level and difficult to sustain in the long term," suggesting that if the Strait of Hormuz cannot effectively restore capacity, Brent crude oil could briefly exceed $120 before the third quarter. Goldman also noted significant two-way risks in oil prices, with future trends highly dependent on passage volumes in the strait, Gulf production cuts, and progress in ceasefire negotiations. Citigroup gave the most impactful short-term target on May 20: a near-term target price of $120 for Brent crude, with the potential to reach $150 in a bull market environment. Citigroup's core judgment is that the oil market is significantly underestimating the risk of long-term supply disruptions - if the Strait of Hormuz only slowly resumes navigation in the third quarter, a surge to $150 in oil prices is not an extreme assumption. Citigroup also estimates that global oil inventories will accumulate about 1 billion barrels by 2026; weak apparent demand has somewhat obscured the fact that actual consumption destruction is relatively limited. UBS, in a report on May 19, took a relatively moderate stance, expecting Brent crude oil to remain around $100 in the short term. If the conflict rapidly eases and strait transit is restored, oil prices may fall back to around $80; however, the persistence of a structurally higher risk premium suggests that oil prices will receive support until 2027.