Key takeaways
- Eurasia Group sees Brent reaching $125 under escalation
- Citi warns Iran conflict could intensify after elections
- Oil rebounds after an 8.7% election-driven collapse
Oil prices rebounded on November 5 after suffering their sharpest daily collapse in months, but analysts are warning that renewed military escalation involving Iran could send Brent crude as high as $125 per barrel.
Brent futures climbed 3.1% to $97.56 on Thursday, recovering from Wednesday's 8.7% plunge to $94.62. Meanwhile, West Texas Intermediate (WTI) rose nearly 2% to $89.85 as traders reconsidered the likelihood of a negotiated end to the US-Iran conflict.
According to Reuters, Citi warned that President Donald Trump's administration could increasingly rely on its executive foreign-policy powers following Republican losses in the midterm elections, potentially escalating military operations.
Separately, Eurasia Group warned that renewed escalation could push Brent into a $110–$125 range, despite the market's recent collapse.
Oil Could Reach $125 as Iran Escalation Risk Remains High
Eurasia Group's latest assessment suggests that the market may be underestimating the possibility of further military confrontation.
The consultancy reduced its estimated probability of renewed US strikes against Iran from 65% to 60%. However, it simultaneously lowered the likelihood of a diplomatic agreement from 20% to just 10%.
The probability of a prolonged standoff increased from 15% to 30%, suggesting that an extended period of uncertainty remains the more likely outcome than a near-term settlement.
| Iran conflict scenario | Estimated probability |
|---|---|
| Renewed US strikes | 60% |
| Prolonged standoff | 30% |
| Diplomatic agreement | 10% |
Source: Eurasia Group, November 5, 2026. Probabilities represent the consultancy's estimates, not guaranteed outcomes.
The findings contrast with the optimism that triggered Wednesday's oil price collapse, when investors increasingly expected political pressure to discourage further US strikes.
However, the conflict's economic consequences have already proved significant. Previous attacks near Hormuz demonstrated how rapidly shipping risks can increase oil's geopolitical premium.
Why Oil Prices Are Rebounding Despite Peace Expectations
Wednesday's selloff reflected expectations that Democratic control of Congress could constrain Trump's military options and encourage negotiations with Tehran.
However, the new Congress does not take office until January, leaving considerable uncertainty over Washington's immediate foreign-policy decisions.
Meanwhile, Iran's Revolutionary Guard reported fires involving two tankers and a tugboat near the Strait of Hormuz on Thursday. The incidents revived concerns about shipping security, although their full consequences remain unclear.
Oil's recovery also comes despite improving global supply conditions.
JPMorgan estimated that the oil market returned to a surplus of approximately 1.1 million barrels per day in September, widening to 1.4 million barrels per day in October as Gulf exports recovered.
That reinforces an important distinction: rising oil prices can reflect geopolitical risk rather than an immediate physical shortage.
As an earlier oil market analysis explained, futures prices respond to expectations of future disruptions, not simply current production volumes.
Oil Price Forecast: Can Brent Recover Above $100?
The immediate question is whether Brent can recover the psychologically important $100 level after its abrupt decline.
A sustained recovery above $100 could bring $105 into focus, followed by $110 if diplomatic progress stalls and shipping risks intensify.
Beyond that, Eurasia Group's $110–$125 range represents a conditional escalation scenario rather than its unconditional oil price forecast.
On the downside, renewed optimism surrounding negotiations could send Brent back toward $94–$95, with $90 becoming a deeper bearish reference.
Recent OPEC+ supply decisions have done little to eliminate these geopolitical fluctuations.
