Crude Oil Price Outlook: WTI Narrows Gap With Brent on Hormuz Risks

WTI has closed the spread with Brent as geopolitical tensions intensify, following Trump’s remarks pointing to a prolonged conflict timeline. Crude oil prices remain elevated above the $100 threshold, with both WTI and Brent trading near the $108 level at the time of writing, marking a sharp intraday move of over 10%. This comes as the conflict enters its sixth week, reinforcing supply concerns and sustained market volatility.

Markets are responding clearly to this environment. Crude oil continues to rally, while equities face pressure, reflecting a shift toward a higher-risk macro backdrop driven by energy and geopolitical developments.

Pricing a Higher-for-Longer Energy Environment

Global markets, including GCC economies, are increasingly pricing in a prolonged period of elevated energy prices. This marks the early stages of an inflationary wave that risks evolving into stagflation, weighing on investor sentiment and economic growth.

Insurance premiums, fertilizer supply disruptions, and the latest risks to aluminum and steel exports from the region — which account for approximately 20% of global demand — are sending warning waves through inflation and credit markets alike.

Eurozone Inflation Ticks Higher

Early signs of this shift are visible in Europe. German CPI has risen to two-year highs, while Eurozone flash CPI has reached 2.5%, exceeding central bank targets. These developments align with a potential shift toward more hawkish central bank policies and reinforce the risk of a stagflationary environment.

In response, major economies are increasingly exploring alternative energy sources and supply routes. Saudi Aramco has already increased capacity on its East-to-West pipeline, currently transporting around 7 million barrels per day to the Red Sea, with the ability to expand toward 12 million barrels per day without additional investment if conditions stabilize. However, the continued disruption of the Strait of Hormuz supports the case for further upside in crude oil prices, in line with the Q2 2026 outlook.

Crude Oil Weekly Outlook – Log Scale

Source: Trading View

Crude oil price action remains firmly within the bullish scenario outlined in the Q2 2026 outlook, trading above the 2023 highs near the $93 level. The chart reflects three key scenarios—bullish, base, and downside—illustrated through green, grey, and red zones respectively.

Bullish scenario
A close above the $110 and $118 levels would extend upside projections toward $135, $147, and $157. These targets align with the 0.786 and 100% Fibonacci extension levels of the broader trend spanning the 2020 lows, 2022 highs, and 2025 lows.

Bearish scenario

Short term: A close below the $93–$91 zone would shift focus toward support levels at $88, $82, and $74, the latter marking a key resistance level during last year’s Middle East conflict.
Long term: A sustained break below the $75 level, which acted as support during the previous US–Iran–Israel conflict, would open the path toward a broader consolidation range between $67 and $50, aligning with the Trump administration's agenda.

Written by Razan Hilal, CMT
Follow on X: @Rh_waves

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