BMI sees Brent above USD 100 into 2027 as Hormuz stays commercially choked

A Strait of Hormuz that is open but commercially compromised is set to keep oil prices high well into 2027, and monetary policy tight with them, research firm BMI said at a MENA outlook webinar attended by EnterpriseAM. BMI expects Brent crude to average above USD 100 a barrel in 4Q 2026 and above USD 110 in 1Q 2027, on the assumption that Washington and Tehran reach another preliminary agreement to reopen the strait early next year. Brent would ease back toward the USD 70s later in 2027 as flows recover, though a serious escalation would push it above USD 120 and delay any normalization.

BMI maps three end-states… It sees a 40% chance a preliminary agreement holds and matures into a final settlement covering nuclear and sanctions issues; a 30% chance such an agreement decays into a “stop-start cycle” of violations and collapsed talks; and a 30% chance of escalation into high-intensity warfare. The first two paths together make a preliminary agreement the base case at 70%, most likely in 1Q 2027 (40%), against 25% for 4Q 2026 and 5% for 2Q 2027. The stop-start path is the most damaging, the agency says, as it would turn a shock that businesses still treat as temporary into a structural drag on investment, confidence, and non-oil growth.

… and two conditions for shipping to normalize under any scenario: a political agreement, then at least four weeks without a security incident, to let owners, insurers, and regulators reprice the risk. Flows then take six to 12 weeks to normalize, with tankers returning faster than LNG and container ships. On that framework, even a late-2026 deal would not deliver stable Hormuz flows before early 2027, and a slip or breakdown pushes it into the second half. Even then, BMI puts baseline traffic around 30% below pre-war levels, near 100 vessels a day.

The knock-on runs straight into rates: Higher energy prices keep inflation elevated for longer, BMI argues, forcing central banks to hold tighter and dragging on activity just as US and global bond yields are already climbing — lifting debt-service costs, slowing credit, and weakening business investment. Its base case for the Fed is two more 25 bps hikes this year, then a hold through 2027, though it says recent Fed signals have made the timing and the number less certain.

The hit won’t be distributed evenly across the Gulf: BMI forecasts the GCC economy shrinking 4.2% in 2026 before a 9.4% rebound in 2027. Saudi Arabia is set to contract an estimated 3.6% this year, with its oil sector to go down 16-17%, while Bahrain (-15.3%), Kuwait (-17.3%), and Qatar (-12.8%) will fall by double digits. The UAE is the near-term surprise, revised up to 1.6% growth for 2026 after it used its Opec exit, the Fujairah pipeline, and ship-to-ship transfers in the Gulf of Oman to lift output to a record 4 mn bbl / d.

Oman and Bahrain mark the extremes: Oman is one of only two Gulf economies BMI sees growing this year, at 3.8%, because its main oil terminal at Mina Al Fahal lies outside the strait and keeps exporting. As a result, its public debt is set to fall toward 25% of GDP by end-2027. Bahrain is the fiscal weak link, with a 2026 deficit widening to 14% of GDP, public debt pushing past 160%, debt-service already absorbing more than a third of revenue, and CDS spreads blowing out well beyond the rest of the bloc. BMI expects GCC partners to keep Bahrain funded, at the cost of politically sensitive spending cuts and new taxes.

For most of the Gulf, the cushion is the balance sheet. Outside Bahrain, BMI argues, fiscal positions are not fragile, with low debt and sovereign-wealth buffers able to absorb the shock. The likely response, it says, is a reprioritization of capital from external deployment toward domestic resilience: defence, infrastructure that cuts reliance on Hormuz, and diversification. That would ripple outward, since MENA economies that lean on Gulf investment, from Egypt to the Levant, would feel it if the money turns inward.

The spillover reaches the oil importers. Higher crude has lifted fuel and import bills across North Africa and the Levant. BMI trimmed Egypt’s FY2026/27 growth forecast to 5.0% and sees the EGP holding in a 52-57 range to the USD into 1Q 2027, cushioned by record reserves near USD 57 bn; it reads the authorities’ tolerance for a weaker currency as a sign of a more flexible regime that can absorb the shock. Lebanon, Syria, and Tunisia face the sharpest cost-of-living pressure and the social discontent that follows, while Iraq has already devalued the IQD 15.4% and turned to the IMF.

MARKETS THIS MORNING-

Asian markets were in the green earlier today. South Korea’s Kospi was up around 4% and Japan’s Nikkei was up around 2.2%. The upswing tracked overnight gains seen among most Wall Street equities.

THE CLOSING BELL-

The ADX rose 0.6% yesterday on turnover of AED 875.7 mn. The index is down 3.5% YTD.

In the green: Space42 (+4.8%), Americana Restaurants International (+4.8%), and Bank of Sharjah (+3.8%).

In the red: Orascom Construction (-5.0%), Abu Dhabi Aviation Co. (-2.2%), and Adnoc Gas (-1.6%).

Over on the DFM, the index rose 0.3% on turnover of AED 496.8 mn. Meanwhile, Nasdaq Dubai was up 0.5%.