As the Middle East conflict widens, state-run institute’s oil forecast looks ‘awkward’

As the war in the Middle East drags on, international oil prices have surged to their highest level in six months, widening the gap between the second-half price forecasts of a state-run research institute and actual prices. The Korea Energy Economics Institute (KEEI) had expected Dubai crude to fall to around $81 a barrel in the fourth quarter of this year, but prices have recently topped $110. With disruptions to crude shipments through the Strait of Hormuz continuing and fighting spreading to Saudi Arabia and elsewhere, the scenario of stabilizing oil prices has failed to materialize.
Data from international crude markets showed that prices remained above $110 a barrel on the 26th, staying at elevated levels. On the 23rd, Brent crude for December delivery closed at $116.72 a barrel on the ICE Futures Exchange in London, its highest level in about six months. The spot price of Dubai crude also reached $116.90 a barrel that day. This came amid growing concerns about crude supply disruptions, including after Houthi rebels attacked energy facilities in Saudi Arabia.
According to KEEI’s “2026 Outlook for the International Crude Oil Market and Prices in the Second Half,” prepared in July and released this month, Dubai crude was forecast to average $84.48 a barrel in the second half of this year. By quarter, prices were expected to fall from $87.66 in the third quarter to $81.29 in the fourth. Even under the high-price scenario, in which supply disruptions continue, the forecast for the fourth quarter was $91.85. However, the spot price on the 23rd was more than $25 higher than that. While this compares a quarterly average forecast with the price on a specific day, the spot price was still far above the high-price forecast issued at the time.
KEEI, too, says it would be difficult to apply its existing forecast unchanged. The institute said, “It is not timely to cite the forecast prepared in July as it stands.” The need to recalculate the forecast has been discussed internally, but no formal revision work has been carried out. If the forecast is revised, it will likely need to account for additional factors, including geopolitical risks in the Red Sea region and risk premiums arising from disruptions to crude shipments. The forecasts for the fourth quarter of this year and the first quarter of next year may be raised, but further analysis is needed to determine the specific scale of any adjustments.
However, it is uncertain whether high oil prices will continue into next year. Kim Tae-hwan, head of KEEI’s Petroleum Policy Research Division, said, “The problem is less a shortage of crude itself than blocked routes for moving it, which is making procurement difficult,” adding, “If crude from Kuwait, Iraq and elsewhere returns to the market, prices could fall quickly.”
[email protected] Ji-young Park Reporter