Investors Come to Terms With a New Reality of Expensive Oil

"Higher for longer" isn't just a rates story anymore. Oil prices are now joining in, too. Investors this week have started to reckon with the possibility that oil prices may stay elevated for longer than expected, as peace talks between the U.S. and Iran show no signs of progress. Instead, tensions appear to be rising. Oil prices surged overnight after Axios reported that President Trump is set to be briefed on new military options for Iran. While crude futures pared their gains -- with Brent hovering around $115 for the nearest-expiring contract -- prices are still much higher than traders were anticipating just weeks ago. In fact, futures contracts suggest traders now expect oil to stay more expensive than previously thought throughout next year, even if the worst of the spike eventually fades. That matches estimates from Wall Street analysts, who have recently raised their oil price forecasts. Goldman now projects Brent futures to reach $90 a barrel in the fourth quarter, up from its previous forecast of $80 a barrel.