(Investing) – Oil prices could see further upside in 2026 as geopolitical risks continue to drive volatility, HSBC says, though the bank adds that underlying market fundamentals should limit rallies and keep prices anchored in the mid-$60s range.
As such, HSBC maintained its forecast at $65 a barrel for 2026 and beyond, despite heightened tensions across several major producing regions.
The bank sees the oil market caught between persistent geopolitical shocks and a sizeable supply surplus. Analysts led by Kim Fustier estimate a global supply and demand imbalance of around 2.8 million barrels per day (bpd) in 2026, the largest since the COVID-19 pandemic, with the surplus expected to peak above 3 million bpd in the first half of the year.
While the expected oversupply has yet to show up clearly in onshore inventories, oil on water has climbed to multi-year highs, keeping prices prone to moves on geopolitical headlines rather than underlying supply and demand fundamentals.
HSBC highlights Iran, Russia and Venezuela as the key “known unknowns” shaping near-term price action. Rising U.S.-Iran tensions and unrest inside Iran have pushed prices up roughly 10% since early January, but the analysts believe such rallies are likely to reverse if oil flows remain uninterrupted.
They argue that “price spikes remain contained and fundamentals should reassert themselves in time if supply is not disrupted,” noting that recent Middle East conflicts have failed to damage core oil infrastructure.
Russia, meanwhile, presents risks in both directions. Intensifying Ukrainian attacks and tighter enforcement of sanctions have increased near-term supply vulnerability, but analysts believe a potential Russia-Ukraine peace deal could ultimately weigh on prices as markets begin to price in sanctions relief.
Venezuela, on the other hand, is seen as less of an immediate disruption risk, with U.S. policy focused on keeping oil flowing after the seizure of President Nicolas Maduro, even as longer-term production growth remains uncertain.
OPEC+ is expected to add to the oversupply later in the year as it continues unwinding production cuts, particularly over the second and third quarters.
HSBC notes the group matters less than in previous cycles and has become more predictable, arguing it is likely to underestimate the extent of market oversupply as additional barrels return.
Despite the scale of the projected surplus, the analysts caution against excessive bearishness. Subdued oil prices reduce U.S. sensitivity to higher crude, which in turn gives Washington greater scope for assertive foreign policy that can periodically lift prices, while China’s ongoing strategic stockpiling also provides support.
In that context, the analysts expect Brent to trade in the $60s, but geopolitics should regularly lift the prices back.
