By THE ALASKA STORY
July 5, 2026 – After months of elevated oil prices driven by conflict in the Middle East, some of Wall Street’s largest investment banks are now making the opposite bet: that oil is headed significantly lower.
That shift could have major implications for Alaska, where oil revenue remains the backbone of state government finances.
Citigroup this week forecast that global benchmark Brent crude could fall to between $60 and $65 per barrel by the end of 2026, explaining that shipping through the Strait of Hormuz is returning to normal and that the United States and Iran are likely to reach a broader agreement in the coming months. Alaska North Slope crude prices generally track Brent closely over the long term.
“We continue to recommend selling any summer rallies,” Citi analysts said in a note to Bloomberg, predicting that incentives for both Washington and Tehran favor continued de-escalation.
The forecast makes Citi one of the most bearish voices on Wall Street, but it is no longer alone.
Goldman Sachs also expects a significant oversupply of crude next year, estimating the world could face a surplus of roughly 3 million barrels per day. Even with governments rebuilding strategic petroleum reserves after months of conflict-driven drawdowns, Goldman says that demand will not be enough to absorb the additional production expected to hit the market.
Morgan Stanley has likewise lowered its oil price forecasts over the next 18 months, citing the reopening of the Strait of Hormuz and expectations of a growing global supply glut.
During the four-month conflict that disrupted shipping through the Strait of Hormuz, Alaska North Slope crude enjoyed an unusually large premium as refiners in Asia sought secure supplies from outside the Persian Gulf. In some periods this spring, ANS traded $8 to $13 per barrel above Brent, pushing Alaska oil prices above $110 per barrel and boosting state revenue.
If Middle East exports continue returning to normal, that premium is expected to shrink.
Under Citi’s scenario, Brent crude falling into the low $60s would likely pull Alaska North Slope crude down into the upper $60s or low $70s, depending on transportation costs and regional market conditions.
That would represent a sharp reversal from the elevated prices Alaska has enjoyed for much of 2026.
The timing is significant.
The Alaska Legislature recently completed months of debate over spending, education funding, and long-term fiscal policy, with many lawmakers relying on relatively healthy oil revenue projections. A sustained decline in oil prices would reduce royalty collections and petroleum tax revenues that fund much of state government.
Historically, oil-related revenue has accounted for the overwhelming majority of Alaska’s unrestricted general fund during periods of strong prices. A prolonged downturn would likely reopen debates over state spending, budget deficits, and the size of future Permanent Fund dividends.
Lower oil prices would also affect industry investment decisions.
Major North Slope developments generally remain profitable at lower price levels than many shale plays elsewhere in the country, but sustained prices in the $60 range could delay some higher-cost exploration or marginal projects.
Consumers, however, could see one silver lining.
Lower global crude prices typically translate into lower gasoline, diesel, jet fuel, and heating fuel prices, although retail prices often lag wholesale markets and are influenced by refining capacity and transportation costs.
Not everyone is convinced oil prices will fall as sharply as Citi predicts.
Some analysts point to historically low global inventories after the Middle East conflict, arguing that governments and commercial buyers rebuilding depleted stockpiles could provide meaningful support for prices. Others note that any renewed geopolitical tensions or stronger-than-expected global economic growth could tighten supplies again.
Still, the tone on Wall Street has shifted dramatically in just a matter of weeks.
For Alaska, where global energy markets still have an outsized influence on state finances, that change in sentiment could become one of the biggest economic stories to watch during the second half of the year.
2 thoughts on “Wall Street turns bearish on oil prices. What does this mean for Alaska?”
It’s been a few years since I’ve looked but historically ANS oil trades above $100 only infrequently and for brief durations, typically these periods have been followed by significant crashes in price. Interestingly the Gulf states have shifted their export routes using various smaller pipelines to keep oil flowing, while closing Hormuz has had an impact bypassing it has limited the effects. Multiple Gulf states are fast tracking new pipelines to completely bypass Hormuz and the instability that Iran poses.
I’ve recently made some moves in my portfolio to maximize some long term returns, of course it wouldn’t surprise me if Iran did something stupid and oil prices spike again before the end of summer. Iran also knows that Democrats are much more amenable to their worldview and the November elections are right around the corner.
Price of oil going up? Raise taxes.
Price of oil going down? Raise taxes.
Steady? Raise taxes.