Scenarios for oil and gold markets in 2026

Introduction

In spring 2026, global financial markets faced a rare combination of risks, and their consequences are only beginning to unfold. The Iran–Israel conflict escalation into direct military confrontation involving the United States has disrupted several fundamental mechanisms that had been shaping major commodity markets for decades. This report examines two interconnected scenarios for oil and gold emerging from the current geopolitical and financial environment.

The oil scenario: a structural break in the petrodollar cycle

The current situation suggests the traditional oil-based dollar system, which has operated since 1974, may cease to function . This system has functioned as follows: increasing oil prices boosted the revenues of Gulf monarchies, who used the resulting dollars to purchase American Treasury bonds. This financing helped cover the U.S. budget deficit and maintain low U.S. interest rates. As Aaron Brown, former head of the analytical service at AQR Capital, noted in his Bloomberg article, the 1974 agreement has been disrupted on both sides.

Now that the conflict's impact has become concentrated on the Persian Gulf monarchies, the logic has shifted in the opposite direction. Countries in the region are forced to spend accumulated reserves on rebuilding production infrastructure, oil refineries, and LNG terminals, while also diversifying supply routes. Additionally, big oil importers such as China, India, and Japan reduced their holdings of U.S. long-term debt to defend national currencies amid an oil-driven inflation shock. This has led to a clear result: according to the Federal Reserve Bank of New York, the value of portfolios of treasury bonds in storage has fallen by approximately $82 billion, reaching its lowest level since 2012. Yields on 10-year Treasury securities have risen from 3.9% at the end of February to over 4.4%, whereas in the previous crises they typically fell amid a flight to safety.

Oil price projections and sanctions uncertainty 

The disruption of established market relationships is unfolding amid unprecedented volatility in oil prices. Adding to this uncertainty, the U.S. administration has sent mixed signals. So far, leading financial institutions have provided the following estimates:

• Citi forecast in April 2026 that Brent oil would average 120 USD per barrel over the next three months, while raising quarterly forecasts to 110, 95, and 80 USD for the second, third, and fourth quarters, respectively.
• Morgan Stanley expects oil prices to range between 100 and 110 USD per barrel in 2026, describing the current situation as more complex.
• According to the IMF's pessimistic forecast, published on 14 April 2026, oil prices could rise by 80% above the January baseline, starting in the second quarter of 2026.

According to a March survey of 38 economists and analysts, the weighted average Brent forecast for 2026  stands at 82.85 USD per barrel, nearly 30% higher than in February. However, this figure does not fully reflect the complexity of the situation, as individual assessments remain highly variable.

The longer the conflict continues, the higher oil prices are likely to rise—and the greater the damage to infrastructure and production will become. In the past, U.S. policy decisions sometimes amplified geopolitical uncertainty while still attracting investments into Treasury bonds. Now, however, the opposite is happening: Treasury assets are being sold to finance oil purchases or repair damaged infrastructure.

A golden opportunity: delayed growth in the face of monetary challenges

What is surprising is not that gold—a traditional safe-haven asset—has failed to rise amid the turmoil. Rather, the real anomaly is that its price has not fallen. This can be explained by the fact that numerous gold-buying countries are compelled to allocate resources towards urgent purchases of petroleum, refined oil products, and fertilisers.  Some may even be selling gold to finance these needs.

Despite this temporary decline in demand from certain central banks, gold prices have remained resilient. This suggests continued underlying demand, which is likely to reemerge once the petroleum market stabilises.

Gold price forecasts from leading banks

Leading investment banks expect gold prices to rise significantly in the second half of 2026:

• Goldman Sachs has raised its year-end gold forecast to 5,400 USD per ounce, up from its previous estimate of 4,900. The rationale behind this revision is that the next stage of gold's rally will be supported by increased private-sector allocations and ongoing structurally-driven demand from central banks.
• JPMorgan expects gold prices to reach 6,300 USD per ounce by the end of 2026, driven by demand from both central banks and investors. The bank had previously expected gold to average 5,055 USD per ounce in the fourth quarter of 2026 and reach 5,400 USD by the end of 2027.
• Morgan Stanley expects gold prices to reach $5,200 per ounce by the end of the year, citing a combination of geopolitical risks, sustained central-bank purchases, and renewed inflows from investors.Wells Fargo Investment Institute has raised its target from 4,500–4,700 USD to 6,100–6,300 USD per ounce, a roughly 35% upward revision. This forecast depends on various factors, such as the potential 'devaluation' of the U.S. dollar and other economic developments.

Monetary policy shifts and dedollarisation 

A key factor influencing gold prices in 2026 could be a shift in monetary policy among major central banks. As one analytical report notes, during a recession, inflation may be 'ignored', and printing presses may operate at full capacity, as it was during the COVID-19 recession of 2020—a backdrop that has historically supported gold prices.

However, the COVID-19 recession was primarily demand-driven, whereas the current environment suggests a risk of a supply-side recession. In this case, central banks are likely to prioritise inflation control by keeping policy rates high, which is generally not favourable for precious metals.

If the key rate stays high for too long and the economy 'dries out', policymakers will have no choice but to save the economy by cutting rates. Such a shift could trigger another inflationary wave—and high inflation has traditionally strengthened demand for gold.

Since the freezing of some sovereign assets in 2022—an action unprecedented in scale—it became possible that similar measures could be applied to any other country. This precedent has gradually weakened confidence in the U.S.-centric financial system and encouraged central banks in emerging markets to increase their gold holdings (currently around 15% compared to more than 30% in developed economies). Goldman Sachs predicts that global central banks will increase their annual gold purchases by approximately 60 tonnes per month in 2026.

Summary of scenarios for 2026

The primary scenario

• Oil. Brent crude is expected to range between 90 and 110 USD per barrel, assuming the conflict remains low-intensity and partial supply disruptions are offset by temporary sanctions relief. Although the petrodollar cycle is starting to recover, it remains below its pre-crisis level.
• Gold. Gold prices are projected to trade between 4,800 and 5,400 USD per ounce, as soon as the Federal Reserve begins an easing cycle in the second half of the year, and central banks continue to diversify their reserves.

Escalation scenario

• Oil prices could range from 120 to 150 USD per barrel in the event of a long-term blockade of the Strait of Hormuz and direct attacks on energy infrastructure across the Persian Gulf. Asian consumers would be forced to pay for supplies in alternative currencies, accelerating dedollarisation.
• Gold prices could rise to 5,700–6,500 USD per ounce if the Federal Reserve, the European Central Bank, and the Bank of Japan simultaneously launch new quantitative easing programmes in response to recession risk and rising government debt. This would likely increase demand for gold as both a safe haven and an alternative to the U.S. dollar.

Deescalation scenario 

• Oil. Brent oil is expected to decline to 75–85 USD per barrel by year-end, supported by a diplomatic settlement, sanctions relief, and the restoration of Iranian oil exports.
• Gold. Gold is projected to correct to 4,000–4,500 USD per ounce, driven by lowered geopolitical risks and a stronger dollar. However, structural factors such as dedollarisation and central-bank purchases may limit the downside.

Conclusion

The year 2026 is expected to be one of the most challenging periods for the 50-year-old petrodollar system. It may even go down in history as the year when the petrodollar system began to fracture.

The petrodollar arrangement has always been a political arrangement disguised as a financial system. As the political environment changes, the financial architecture built around it is beginning to shift as well.

For gold, the current situation is paradoxical. While it has not triggered an immediate price surge, it has created the conditions for strong medium-term growth. Once the pressure on importing countries to finance urgent oil purchases eases and monetary incentives from central banks become more significant, pent-up demand is likely to return—helping prevent prices from falling further.

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