Shenwan Hongyuan says market drivers have shifted in H2 2026 from an AI
narrative to recurring US–Iran conflict and energy supply shocks. US politics
pressure to push down oil pre-midterms to ease inflation is likely to
strengthen, and enforcement appears stronger this cycle. Trump has tied a
ceasefire and lower oil prices to the midterms and signaled oil could fall
after the vote. Supply-side constraints include low inventories, disrupted
strait transit, limited refinery flexibility and widening gasoline/diesel crack
spreads; the forward curve shows a significant spot premium and the supply
buffer is weaker than in 2018, with political price suppression occurring later.
Under a neutral scenario, Shenwan expects prices to stay elevated before US
midterms (central estimate ~$100/bbl); post-midterms oil could decline
quarter-by-quarter in late‑2026 to early‑2027 toward roughly $75/bbl, though
inventories and refined‑products bottlenecks will keep the central level above
pre‑conflict norms.
