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UBS: Conflict Likely to Be Short-Lived
UBS warned that escalating tensions between the US and Iran could heighten global geopolitical risks. However, it does not expect the recent escalation to last long, anticipating instead only short-term disruptions to global energy supplies.
The bank expects the initial rise in oil prices to retreat — at least partially — once it becomes clear that military operations are nearing an end. UBS also noted that global markets may experience volatility in the coming weeks, but investors are likely to refocus on economic indicators once geopolitical shocks subside.
In a note, the bank added that an escalation of the US-Iran conflict into broader military action was not unexpected, pointing out that it had previously predicted on Feb. 24 that the US could launch a strike on Iran.
UOB: Oil Forecast to Stabilize at $80 During Iran Crisis
United Overseas Bank (UOB) expects oil prices to stabilize at $80 per barrel during Q2 and Q3 2026, despite the escalating conflict in Iran and the broader Middle East.
The bank said it is still premature to expect prices to reach $100 per barrel unless the regional escalation intensifies further. It noted that any attacks on Gulf energy facilities or oil tankers could push prices above the $80-per-barrel level.
UOB also forecasts that oil prices will resume a downward trend through Q1 2027, averaging around $70 per barrel.
The bank noted that OPEC still holds spare production capacity due to earlier production cuts since 2023, adding that there remains room for OPEC — particularly Saudi Arabia — to raise output if necessary to curb any sharp surge in energy prices.
According to the note, the latest Iran crisis has reinforced gold’s role as a safe haven. The bank raised its gold price forecasts to $5,400 per ounce in Q2 2026, $5,600 in Q3 2026, $5,800 in Q4 2026, and $6,000 per ounce in Q1 2027.
Capital Economics: Gulf Oil Has Alternative Routes Unlike Natural Gas
A report by Capital Economics highlighted that Gulf oil exports have alternative routes that bypass the Strait of Hormuz. Saudi Arabia operates a pipeline to Yanbu with a capacity of 5 million barrels per day (bpd), which was temporarily expanded to 7 million bpd in 2019. The UAE also operates a pipeline with a capacity of 1.8 million bpd, roughly equivalent to its exports via Hormuz, though the available capacity is limited.
However, Iraq, Kuwait, and Iran lack significant alternatives, meaning that around 10–20% of global oil supplies could be at risk in the event of a disruption, according to Capital Economics.
In contrast, liquefied natural gas exports have no alternative routes, which explains why European gas prices surged about 23%, compared to an 8% increase in Brent crude.
The Strait of Hormuz accounts for roughly 25% of globally seaborne oil shipments (20.3 million bpd, including around 14 million bpd of crude oil) and about 20% of global LNG flows (19.3 billion cubic feet per day) in 2024.
Allianz: Oil Could Reach $130 Per Barrel if Conflict Escalates
Global insurer Allianz said that US and Israeli strikes on Iran would affect energy markets, shipping costs, inflation risks, and financial conditions. It noted that the duration of the conflict will be the key factor determining the economic impact, warning that a prolonged war could trigger an “inflationary shock similar to the 2022 crisis”.
Regarding energy prices, Allianz expects oil to reach $70 per barrel by the end of 2026, more than 15% higher than previous estimates, with prices potentially peaking at $85 per barrel. However, if the conflict drags on, oil prices could climb as high as $130 per barrel.
It also indicated that the war’s impact on inflation and economic activity will remain limited under the base scenario, expecting inflation to rise by about 0.1–0.2% to 2.6% in the US and 2.1% in Europe, compared to previous forecasts of 2.5% and 1.9%, respectively.
Under the more pessimistic, but less likely, scenario, inflation could reach 3.8% in the US and 3.1% in Europe.
Allianz also expects economic growth in the US and Europe to slow down by 0.1% to 2.5% in the US compared to 2.6% in pre-war forecasts, and 1.2% in Europe compared with 1.3% previously.
The insurer stressed the importance of securing the Strait of Hormuz, which carries about 30% of global hydrocarbon flows, noting that the oil market reaction was driven more by maritime transport disruptions than by oil scarcity.
More than 200 oil and LNG vessels are currently anchored outside the Strait, reflecting rising war-risk insurance concerns and precautionary operational suspensions.
Gold Could Reach $5,600 an Ounce amid Iran War
Fitch Solutions expects gold to reach $5,600 per ounce if there are no signs of a breakthrough in the Middle East. If the conflict continues for two to three weeks, gold could rise to around $5,850 per ounce and potentially reach $6,500 per ounce. The firm noted that investors are seeking safe-haven assets to hedge against the conflict’s impact.
Europe Most Exposed, Gas Could Reach €100
ING Group said the Eurozone is the most exposed to the macroeconomic repercussions of the military turmoil in the Middle East, noting that the region had recently begun to emerge from recession despite a new state of uncertainty related to tariffs.
In a note, the bank said earlier projections by the European Central Bank (ECB) indicated that a 14% increase in oil prices would raise inflation by 0.5% and reduce gross domestic product (GDP) growth by 0.1%.
Goldman Sachs warned that a disruption to gas flows through the Strait of Hormuz for one month could push European prices to €62–74 per megawatt-hour, with storage levels falling by 8%. If the disruption lasts more than two months, prices could exceed €100, placing pressure on global demand. Meanwhile, the impact on the US market would remain limited thanks to ample supplies.
Fitch: GCC Economies Can Withstand Short-Term Shocks
Fitch Ratings said sovereign ratings of the Middle Eastern countries have sufficient buffers to withstand a short-term regional conflict that does not escalate. However, the agency warned that the trajectory of the conflict remains uncertain, and permanent damage to major energy infrastructure or a prolonged conflict could pose risks to regional sovereign ratings.
Its base scenario assumes the conflict will last less than a month, similar to the 2025 Iran–Israel 12-day war. Yet Fitch noted that the current attacks have had a greater impact.
The extent of physical damage to GCC countries’ energy infrastructure will be the decisive factor in determining pressure on sovereign ratings.
Fitch expects the Strait of Hormuz to remain closed throughout the conflict, either due to a direct blockade, ships’ inability to obtain insurance, or other security threats.
Saudi Arabia and the UAE possess pipelines that allow them to transport a large share of their production away from the Strait. Additionally, major oil exporters store oil outside the region. However, the largest impact, Fitch said, would fall on Bahrain, Kuwait, and Qatar, which lack alternative supply routes beyond the Strait, as well as Iraq, whose exports rely heavily on the passage.
Higher energy prices would help offset the impact of any temporary disruption in export revenue, as long as shipments continue reaching markets.
Fitch expects the conflict’s impact on GCC economic growth to be temporary. However, long-term damage could occur in locations positioning themselves as safe havens for international companies and expatriates. Further, expatriate outflows could put pressure on housing markets across the GCC.
“Most GCC countries hold significant assets that provide a buffer in the event of a short-term disruption in energy revenue, while non-oil sectors face low taxation. Therefore, any disruption would have only a limited impact on public finances,” Fitch added.
Analysts at Citigroup expect a broad negative impact on regional equities as risk premiums are repriced. If escalation continues, sectors such as real estate, finance, transport, and retail could decline, while defensive sectors may remain more resilient.
Zilla Capital: Supplies Unlikely to Be Disrupted
Zilla Capital said wars in their early stages do not typically impose significant economic costs, but risks arise from prolonged conflicts that generate rising costs and geopolitical consequences, as in the aftermath of the 2003 Iraq War. The consultancy warned that the repercussions of an Iranian war could be more severe.
Iran’s response is expected to be indirect and continue over a prolonged period, as Tehran’s influence extends beyond missiles to what it described as the “geography of energy”.
Moreover, attacks on GCC infrastructure would not necessarily disrupt supplies as much as they would undermine the sense of security characterizing the region’s economic model, as “investment, insurance, shipping, and long-term contracts all depend on that sense of stability.”
US Federal Reserve Outlook for War’s Implications
Neel Kashkari, a member of the Federal Reserve, said the Middle East conflict increased uncertainty over the US economic outlook and made it more difficult to forecast the future course of monetary policy.
The Federal Reserve needs to monitor this new development to assess how long its impact will last and how significant it will be, he said.
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