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Oil in 2026

• Last year’s downward trend in the price of oil is set to continue into 2026, with most analysts expecting Brent crude to test USD55pb in the first half of the year.
• There is undue concern about geopolitical supply disruption buoying prices, whereas we believe the real focus should be on what Opec+ decides to do at the end of the quarter.
• My forecast for Brent crude on 31 December is therefore USD55pb, but with the risk to this price skewed to the downside.

By Alastair Newton

HEM: Jan-26 Views & Challenges

• Hawkish cuts led markets to price less easing, or even hikes, but there was little change in BoE views.
• The MPC is split in the face of wage growth persistently above target-consistent levels but is bias to ease in May.
• Rising unemployment rates may aid the appropriateness of previous cuts if the neutral rate is less elevated.

HEW: Dovish Data Dumps

• Inflation data broadly disappointed expectations over the past week. The labour market news was more mixed, but higher UK and US unemployment rates raise eyebrows.
• Policymakers behaved themselves, with no surprises and wide dispersion, including a BOJ hike, while the BoE delivered the finely balanced hawkish cut we expected.
• The release calendar adopts a holiday stance for the next few weeks, with only UK and US Q3 GDP data out before Christmas. This publication will be back on 9 January.

By Philip Rush

BOJ: Measured Steps Toward Normalisation

• A hike to 0.75% was delivered as expected, reflecting confidence in wage-led inflation momentum, though real rates remain deeply negative and uncertainty around trade policy and wage sustainability persists.
• Future tightening hinges critically on 2026 spring wage negotiations reaching 5%+ and underlying inflation remaining firm as food-price effects wane. Some dissenting board members questioned inflation's near-term durability.
• Real interest rates at significantly negative levels permit gradual tightening toward the estimated 1-2.5% neutral range, with markets pricing 1.0% by mid-2026. Limited runway and external risks may constrain the pace of normalisation.