Middle East Tensions Lift Oil Price Forecasts, Sending Formosa Petrochemical and Peers Higher

Preface

Unresolved tensions involving the United States and Iran have renewed concerns about crude supply and the possibility that oil prices will remain elevated toward year-end. Recent forecasts from Goldman Sachs and ANZ Bank raised expectations for Brent crude, while warnings about transport disruptions and persistent supply tightness gave investors reason to reassess energy-related shares. In Taiwan, Formosa Petrochemical (台塑化, 6505-TW) reversed an early decline and rose sharply during the session, joined by gains across the other three companies commonly grouped with it as the Formosa Plastics Group’s “four treasures.” This article reviews the oil-market outlook, the stocks’ movements, and the factors that may affect Formosa Petrochemical’s prospects. Higher oil prices may support sentiment, but they do not remove the risks associated with crude costs, transportation, and refining margins.

Lazy bag

Goldman Sachs and ANZ Bank both raised their Brent crude forecasts to $105 per barrel, citing substantial supply risks and the prospect of prolonged market tightness. On the day described, Formosa Petrochemical rose more than 6% after turning positive, while Nan Ya Plastics (南亞, 1303-TW) and Formosa Chemicals & Fibre (台化, 1326-TW) gained 2%, and Formosa Plastics (台塑, 1301-TW) advanced more than 1%. The recent rebound followed a steep decline in Formosa Petrochemical shares. Analysts cited strong refining conditions in 2026 and estimated earnings, while cautioning that investors should monitor oil prices and refining spreads. If the conflict escalates after the U.S. midterm elections, Brent could reach $120 per barrel or higher.

Main Body

Oil-market expectations shifted as the U.S.–Iran conflict remained unresolved and the U.S. midterm elections approached. Against this backdrop, Goldman Sachs and ANZ Bank recently increased their forecasts for crude prices. Goldman Sachs projected that December Brent crude futures (BRENT) could reach $105 per barrel, compared with its previous forecast of $90 per barrel. ANZ also raised its year-end Brent forecast to $105 per barrel. These revisions focused investor attention on supply security and helped lift sentiment toward energy and petrochemical shares.

On the trading day described, Taiwan’s broader market opened lower, with widespread declines. Formosa Petrochemical initially opened down but then recovered, turning positive during the session and rising by more than 6%. Its gains were accompanied by advances across the other three Formosa Plastics Group companies: Nan Ya Plastics and Formosa Chemicals & Fibre each rose 2%, while Formosa Plastics gained more than 1%. The share-price moves stood out against a weak market and suggested that investors viewed the group as a potential place to seek relative shelter amid concerns about oil prices and supply.

Goldman Sachs’ November 1 report highlighted the scale of the potential supply risk. It said the possibility of reduced crude supply was considerable and could keep a substantial risk premium embedded in prices in the near term. A risk premium is the extra amount investors may be willing to pay when uncertainty about future availability increases. In this case, the concern is not limited to whether oil production might fall: market participants are also watching whether crude can be transported and delivered reliably.

ANZ’s assessment similarly emphasized the possibility that tightness in the global oil market could last longer than previously expected. The bank raised its forecast for Brent crude prices by year-end from $95 per barrel to $105 per barrel. It pointed to risks to the quantity of crude available for delivery, particularly if conflict continues to constrain transportation. This distinction matters because production volumes alone do not determine the amount of oil that reaches buyers. A barrel can be produced but still be delayed or blocked from reaching refineries and other destinations if shipping routes or logistics are disrupted.

For oil markets, the consequences of transport restrictions can persist even after immediate hostilities ease. ANZ cautioned that, even if the United States and Iran agree to a ceasefire, physical crude transportation and storage facilities would need time to return to normal levels. This implies that a diplomatic agreement might not instantly restore the flow of oil or eliminate the price premium associated with disruption. The pace of recovery in shipments and storage conditions would remain relevant to the market’s assessment of supply.

Formosa Petrochemical’s recent share-price performance provides context for the day’s rebound. The stock had been affected by a sharp decline in Taiwan shares, and the broader petrochemical group—which had previously been regarded by some investors as a defensive destination for funds—also fell. Formosa Petrochemical dropped from a high of NT$129 on October 14 to a low of NT$98.3 last Friday, a decline of more than 23%. It fell below short-term moving averages and recorded 8 consecutive down sessions on its daily candlestick chart. Its move higher on the day described reversed some of that recent weakness. The four Formosa companies also attracted investor attention as a possible relative haven while the wider market was down.

Analysts cited Formosa Petrochemical’s exposure to a strong refining environment in 2026 as a potential source of support. Earnings per share for the first 3 quarters stood at NT$7.08, and full-year EPS was expected to reach NT$9–10. For 2027, refined-product supply was still expected to be tight, a condition that could benefit the company. Such expectations are tied to the relationship between product prices, crude input costs, and refining margins, rather than to crude prices in isolation. Higher oil prices may signal tight markets, but the effect on a refiner’s profitability depends on how costs and selling prices move relative to each other.

That is why analysts also emphasized the need to watch for a decline in oil prices and refining spreads. If crude prices retreat, the market environment could change; if refining margins narrow, the benefit of strong product demand or supply constraints may be reduced. The available outlook therefore combines potential upside with important qualifications. Forecasts are assessments of possible future conditions, not guarantees of the prices or earnings that will materialize.

ANZ also described a more severe scenario. If the conflict involving Iran continues to escalate after the U.S. midterm elections, Brent crude futures could rise to $120 per barrel or higher. This scenario would represent a further increase beyond the bank’s $105 per barrel year-end forecast. Its central concern is that conflict can affect both supply availability and the movement of oil through transport networks. Conversely, even a ceasefire may not immediately restore normal deliveries or storage levels. Investors therefore face several variables: the course of the conflict, the reliability of transport, the duration of supply tightness, crude prices, and refining spreads.

Overall, the day’s gains in Formosa Petrochemical and its three group peers reflected a market responding to higher oil forecasts and a search for relative resilience during a broad decline. The underlying story, however, is not simply that expensive oil benefits every energy-related company. The potential advantage for Formosa Petrochemical depends on refining conditions and product supply, while the risks include changing crude prices, transport disruptions, and weaker refining margins. Continued attention to those factors will be important in assessing whether the share-price rebound signals a lasting improvement or a short-term response to elevated geopolitical uncertainty.

Key Insights Table