EIA raises Brent price forecast to $98 on Iran war supply tightness

The US Energy Information Administration (EIA) has raised its oil price forecasts for 2024 and 2025, citing tight global supplies and falling inventories due to the ongoing war with Iran. The EIA now expects the global benchmark Brent crude to average about $98 a barrel in 2026, an 8% increase from its previous projection. The conflict has disrupted shipments through the Strait of Hormuz, which handled about 20% of global oil supplies before the conflict. Iran has also targeted regional energy infrastructure in retaliation for US military strikes.

The EIA forecasts Brent crude to average about $105 a barrel in the fourth quarter of 2024, $14 above its earlier estimate. US retail diesel prices, which hit record highs last month, are projected to remain above $6 a gallon in October before gradually declining to an average of about $4.50 in 2027.

Despite the current supply disruptions, Middle Eastern oil production and exports are expected to gradually recover. This improvement is anticipated as transit through the Strait of Hormuz improves and producers increasingly use alternative export routes and ship-to-ship transfers. Regional oil flows have already improved, with Gulf oil flows, excluding Iran, reaching more than 81% of pre-war levels in September.

As workarounds expand, crude-production shutdowns are expected to decline from 4.5 million barrels per day in the fourth quarter of 2024 to 2.7 million barrels per day in the first quarter of 2027. These measures include Saudi Arabia resuming shipments through its East-West Pipeline to the Red Sea and exporters adapting to attacks through “dark transits,” where tankers switch off their tracking systems before transferring cargo at sea.