Oil Prices to Stay High as Middle East Supply Remains Constrained

Oil market conditions are settling into a prolonged period of supply disruption rather than discrete shocks, according to S&P Global Energy. This outlook assumes no end to the US-Iran conflict, no normalization of traffic through the Strait of Hormuz, and no removal of Red Sea disruption risk from Iran's Houthi allies by 2027.

The firm now expects Middle Eastern crude production to average 21 million barrels per day (b/d) through 2027, 4.2 million b/d below its previous projection. This is due to security and logistical constraints limiting how much oil can reach the market, despite no permanent loss of production capacity.

Gulf producers have strong incentives to adapt around political and security constraints where possible, said Jim Burkhard, vice-president and global head of crude oil research at S&P Global Energy. The market is adjusting to conditions defined by unresolved conflict and persistent maritime risk, with oil flows remaining below prewar levels and an uneven path toward recovery.

S&P Global expects crude oil prices to remain in the $80-100/bbl range through 2027, with Dated Brent averaging around $90/bbl or higher for the balance of 2026. This is above the firm's previous forecast, which was revised due to a lower expectation for Middle Eastern supply recovery.