Brent crude oil prices are projected to average around $70 per barrel in FY26 despite geopolitical turbulence in the Middle East, according to a report by Emkay Research. The agency said oil markets remain “fundamentally well supplied,” citing rising output from both OPEC+ and non-OPEC+ producers as key factors stabilising prices.“We continue to assume Brent price at USD70/bbl for FY26. Fundamentally, oil markets are well supplied with rising production,” the report said. This outlook comes despite a recent spike in prices caused by Israel’s attack on Iranian nuclear infrastructure, which triggered a sharp 12–13 per cent surge in Brent to nearly $80 per barrel.Prices have since moderated to around $75 per barrel, even as tensions remain high. Iran retaliated with missile attacks on Israeli cities, while Israel has ramped up its operations. Yet, according to Emkay, unless key energy infrastructure suffers sustained damage, as witnessed during the Russia-Ukraine war, markets are likely to remain stable.As per the news agency ANI, the report further noted that a ceasefire could potentially drive Brent prices even lower, possibly below the $70 threshold. “The market is well buffered by existing inventory levels,” Emkay noted, adding that a steady supply outlook would help limit long-term inflationary pressure.The report also flagged limited but notable disruptions. Iran has partially shut its South Pars gas field following Israeli airstrikes. While domestic supplies have been impacted, the wider global market response has been restrained. In contrast, Israel suspended operations at two of its gas fields supplying Egypt and Jordan.Spot LNG prices have climbed to $13.5/mmbtu, up from $12 before the conflict began.As per news agency PTI, while Iran exports up to 2 million barrels per day, about 2 per cent of global supply, its long-standing sanctions mean much of that oil is already being sold at a discount to buyers like China. Additionally, OPEC’s spare capacity remains unusually high, with over 4 million barrels per day in reserve, primarily from Saudi Arabia and the UAE. The IEA also maintains over 1.2 billion barrels in strategic reserves across OECD nations.Despite the Middle East tensions, demand remains tepid. China’s industrial slowdown and its reduced refinery output in May, down 1.8 per cent year-on-year, have softened consumption. The IEA also predicts global supply in 2025 will surpass demand by nearly 1.8 million barrels per day, leaving room for further price cushioning.On the corporate front, Emkay believes that while both upstream producers and oil marketing companies (OMCs) remain within a “safe zone” at current price levels, OMCs offer more attractive valuations and better risk-reward potential.However, the gas market could face pressure. The early onset of monsoons in South Asia has already reduced demand, and Emkay warns of continued volatility in the sector.Globally, the risks of escalation remain real. If Iran decides to shut down the Strait of Hormuz, through which nearly 20 million barrels of oil transit daily, global prices could surge. While alternate pipelines through Saudi Arabia and the UAE exist, insurance and freight costs have already jumped nearly 60 per cent since hostilities began.
