EIA Raises Oil Price Forecasts Amid U.S.-Iran War Disruptions

The U.S. Energy Information Administration (EIA) has significantly raised its oil price forecasts for 2026 and 2027, citing the ongoing U.S.-Iran war as a major factor. The agency now expects Brent Crude to average $105 per barrel in the fourth quarter of 2026, up $14 from its previous estimate. The full-year average for 2026 has been increased by 8% to $98 per barrel, while the 2027 average is projected at $84 per barrel, a $10 increase. The war has disrupted global oil inventories and tightened the diesel market, keeping prices elevated.

The conflict has led to approximately 4.5 million barrels per day of global crude production disruptions, with the Strait of Hormuz transit remaining constrained. Despite this, alternative routes and ship-to-ship transfers have restored Persian Gulf oil flows to over 81% of pre-war levels. The EIA also projects that U.S. crude output will set records for two consecutive years, reaching 14.3 million barrels per day in 2027.

Asian importers are adapting by pivoting to alternative oil sources. Japan, heavily dependent on the Strait of Hormuz, saw a 64% year-over-year drop in April crude imports. South Korea and Malaysia also experienced significant declines, while Thailand increased its imports by 62%. The U.S. Strategic Petroleum Reserve has fallen to its lowest level since 1982, highlighting the thinning emergency buffer.

The EIA expects U.S. retail diesel prices to remain above $6 per gallon through October before gradually declining to an average of $4.50 per gallon in 2027. Elevated fuel costs are squeezing business operations and household budgets. The trajectory of geopolitical developments remains the biggest uncertainty in the oil market outlook.