Middle East Oil Production Faces Long-Term Setbacks Amid Ongoing Disruptions

The US Energy Information Administration (EIA) has downgraded its forecast for Middle East oil production, stating that it may not recover to pre-conflict levels by the end of 2027. Disruptions to shipping through the Strait of Hormuz and attacks on energy infrastructure have forced producers in the region to sharply reduce output.

The EIA estimates that around 5.5 million barrels per day (bpd) of Middle East oil output was shut-in during July, equivalent to over five percent of global consumption. The agency expects flows through Hormuz to be severely constrained through August but assumes shipments will start to slowly increase in September.

Even if most Middle East oil output and global trade recover to pre-conflict levels by early 2027, the EIA predicts that around 600,000 bpd of production from the region will remain shut-in until the end of 2027. This has led to a widening supply deficit, prompting the EIA to raise its oil price forecasts for both 2026 and 2027.