Prolonged war could send oil up to $115/b, with surplus returning by 2027: World Bank

A 1% reduction in oil production due to a geopolitical shock typically leads to crude prices rising by more than 11%, the World Bank said April 28, forecasting that Brent would average $86/barrel in 2026 if there is no further escalation of the war in the Middle East.

A prolonged war or a more serious disruption to oil flows could push Brent prices to $115/b in 2026, the bank said in its latest commodity markets outlook.

"At the onset of a significant geopolitical oil shock, a surge in uncertainty over future supplies and global economic conditions can drive risk premia higher, reflecting both efforts to secure physical stocks and speculative market responses," the World Bank said. Supply shocks also lead to "greater inventory building in the medium term as a form of self-insurance."

The international development bank's baseline scenario expects the most acute phase of Middle East trade disruptions to end in May, with shipping volumes transiting through the Strait of Hormuz gradually returning to prewar levels by October.

Global oil supply is expected to fall by 1.5 million b/d in 2026, according to the outlook.

A marginal decline in global oil consumption would be prompted by higher prices and "proactive policy efforts to limit consumption amid shortages in some countries," said the World Bank, basing its outlook on data from the International Energy Agency.

The latest shock, with the largest oil supply loss on record, "deepens a trend of structurally weak oil consumption in recent years," the bank said.

Oil stocks, including volumes held on water, would substantially buffer consumption through the middle of 2026, according to the bank, with global supply-demand balances expected to return to surplus late in the year as production recovers to 108.3 million b/d in the second half of 2026.

But "lingering geopolitical risk premiums and the aftereffects of a period of severe dislocations and intense uncertainty" would persist, the World Bank said.

Brent oil prices could fall to $70/b in 2027, according to the bank.