A U.S. government report projects that worldwide crude output and transport will recover to levels seen before the Iran conflict by late 2026.
That disruption resulted from attacks on vessels transiting the Strait of Hormuz, a narrow waterway that carries a significant share of the world's oil.
This marks a shift from the previous round of projections, which had forecast a normalization of shipments through the Strait of Hormuz by early 2027.
The Strait of Hormuz is a critical chokepoint for global energy trade, and the swift return of ship traffic there has surprised many analysts. The pace of recovery has outpaced earlier estimates, partly because of diplomatic efforts to secure safe passage for tankers. An EIA spokesperson said, "We expect Brent crude to average $65 per barrel in 2027, down from $74 in the current quarter."
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The Strait of Hormuz, connecting the Persian Gulf to the Gulf of Oman, is a vital artery for global energy trade, carrying about 20% of the world's oil. The disruption caused by attacks forced many tankers to seek alternative routes, driving up costs and insurance premiums. The coordinated international effort to secure safe passage, including naval escorts and diplomatic agreements, has been instrumental in speeding up the return to normal operations.
The EIA report, released Tuesday, forecasts that worldwide oil demand will be reduced by 1.2 million barrels per day in 2026, with most of that drop happening in nations outside the OECD.
As supply returns and demand weakens, inventories will rise. The EIA expects global oil inventories to increase by 2.7 million barrels per day in the fourth quarter of 2026 and by 5 million barrels per day in 2027, pushing the market back into oversupply.
Oil prices are falling. That is well below the prior forecast of $79 for next year. While still above pre-war levels, they are considerably below last month's forecast.
According to the EIA, energy markets worldwide continue to feel the shockwaves of the disruption, as some ships still come under assault while crossing the Strait of Hormuz.
Investors now anticipate a near-term oversupply as oil that was earlier stuck in the Persian Gulf region flows to customers. The shift from shortage to oversupply is expected to deepen through 2027. This faster-than-expected normalization means that the price decline may persist longer than initially feared, with inventories building steadily into next year.
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