Oil & Gas: Barrels Returns as Market Rebalances (Overweight)

The US and Iran have reached an interim agreement to end the war and reopen the Strait of Hormuz after 111 days, earlier than our five-month escalation base case set out in March 2026.

This development has unwound a large portion of Brent’s war premium, with prices retreating from an intraday high of USD126/bbl to USD72/bbl as barrels returns to the market following the lifting of blockade measures.

“We expect Brent to trade within a softer 2H2026 range of USD70–85/bbl, assuming substantial compliance with the interim agreement, continued reopening of Hormuz flows and no major war provocation,” says PIB.

Oil & Gas

Nevertheless, we do not expect prices to fully revert to pre-war lows, as tanker traffic normalisation remains gradual, selected energy facilities require restoration and inventories need to be rebuilt after the recent drawdown.

“On this basis, we revise our 2026 Brent assumption to an average of USD83/bbl, reflecting the elevated 1H2026 price spike and a lower 2H2026 trading range.”

Finalisation of the peace agreement remains the key swing factor to our assumption.

“We maintain our Overweight sector call but lower our target prices for Hibiscus Petroleum (Outperform, TP: RM2.80) and Dialog Group (Neutral, TP: RM2.07) after revising our earnings assumptions.”

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