Oil prices experienced a modest increase on Wednesday, having dipped below $90 per barrel for the first time since August this year. This decline followed a statement from US President Donald Trump, who expressed his belief that the war in Iran “is effectively over.” Brent crude futures approached $92 per barrel, while US West Texas Intermediate crude futures surpassed $86 per barrel on Wednesday morning. “Iran militarily is effectively over. We are just keeping it the status quo,” Trump said on Monday after meeting with Qatar’s prime minister. The US President added that Iran has been “decapitated” but he is still looking to make sure there is a long-term solution to ensuring that Iran’s nuclear programme is defanged. “The military action doesn’t seem to be a very necessary thing, but we are locked and loaded, ready to go for any reason that changes,” Trump said.
This came a day after Trump said that the US could avoid another round of military action against Iran, only if the latter agreed to what he described as a strong deal. “It depends on whether or not they sign a very strong agreement. The answer is, highly unlikely it’s going to be necessary,” Trump told. He repeated five times that renewed military intervention was unlikely if Iran made tangible progress in discussions over its nuclear programme and the reopening of the Strait of Hormuz. While Trump’s comments this week have raised expectations for a resolution to the Middle East conflict, many believe it may be premature to rely on an announcement from an individual known for his frequent shifts in position. Meanwhile, the American naval blockade of Iran remains firmly in place. Iranian oil exports continue to face significant pressure, comparable to levels observed in recent history. A new US task force known as the Iron Gate is being deployed with a mandate to restrict Iran’s overland trade.
Recent estimates from US Centcom, indicate that Iran has been prevented from exporting over $25 billion in crude oil. This indicates that the conflict in Iran has evolved beyond a conventional military operation, transforming into an economic struggle that imposes significant costs on the affected party, as reported. Goldman Sachs has recently adjusted its projections for oil prices, attributing this revision to escalating risks associated with global supply chains. The investment bank cautioned that Brent crude might reach $140 per barrel by 2027 if oil production in the Gulf region continues to fall considerably short of its 2025 average. The bank has adjusted its December Brent crude forecast upward to $105 per barrel, an increase from the previous estimate of $90. Its forecast for US West Texas Intermediate crude was also increased to $94 per barrel from $81.
In an optimistic scenario, Brent crude may attain $140 per barrel and maintain an average of approximately $130 in 2027, contingent upon Gulf oil production being 3.5 million barrels per day lower than its 2025 average, as reported by source. Goldman Sachs anticipates that oil markets will factor in an increased geopolitical risk premium, considering the potential for interruptions to Middle Eastern supplies, the historical length of significant supply shocks, and the difficulties associated with achieving a sustainable diplomatic resolution. Analysts underscored the prevailing uncertainty associated with the conflict, noting the challenges in forecasting the war’s trajectory. Initially, the bank anticipated that the US administration would refrain from surpassing specific economic thresholds. However, seven months into the conflict, several of those thresholds have been breached, while a clear strategy to bring the war to an end has yet to emerge.
