TD Securities strategist Pooja Kumra highlights that markets are focused on the Strait of Hormuz and Iran conflict scenarios, with prediction markets assigning only modest odds to a ceasefire by April 2026. Even a benign outcome is seen resetting Oil higher than prior forecasts, while a prolonged conflict could send prices sharply higher, reinforcing pressure on inflation and European and UK rates.

Iran conflict scenarios reset Oil outlook

"Prediction markets are currently pricing roughly a 30% probability of a cease fire by March 2026 and a 40% probability of a cease fire by April 2026. As discussed in our playbook for the crisis Market Scenarios For Uncharted Waters - Week Two of the Iran Conflict, even in a benign scenario, the disruption is sufficient to reset oil prices to $70-75 per barrel."

"This is well above our earlier forecast of Brent averaging around $65 this year, which now looks unachievable. Under a prolonged conflict, upside risks extend materially, with oil prices potentially moving north of $150."

"A 10% rise in oil prices lowers EU/UK GDP by around 0.1–0.2% while lifting inflation by 0.3–0.4% over a 12m timeframe."

"Unlike 2022, Europe is facing a price shock rather than a supply shock, reflecting greater energy resilience through higher LNG imports, increased storage, and a ~20% reduction in gas usage."

"This has enabled a more coordinated global effort to ease oil prices, unlike the largely unilateral European response in 2022 where the fiscal response was close to 3% of GDP."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)