The prolonged U.S.-Israeli war with Iran has defied early expectations of a swift resolution, pushing oil prices to sustain higher levels well into 2027. The ICE Brent crude futures contract for January 2027 is currently trading at $102.59 per barrel, with the June 2027 contract at $92.71 and the December 2027 contract at $84.75. These prices reflect a significant increase from December 2025, when Brent crude was below $70 per barrel.
Despite reports of oil flows from the Persian Gulf recovering to pre-war levels, prices remain elevated due to a lack of trust in official figures and the high costs of alternative shipping methods. Iran's near-daily strikes on tankers in the Strait of Hormuz have maintained a war premium on oil. The situation is even more severe for refined fuels like diesel, as Middle Eastern refineries have been targeted in retaliatory strikes, tightening global supply.
The International Energy Agency (IEA) announced plans to release over 20 million barrels of diesel from collective inventory, potentially reaching 50 million barrels, to address soaring prices. However, this temporary measure raises concerns about future replenishment, given the global shortage of refining capacity. The IEA remains optimistic about a future peace agreement, predicting a rebound in global oil supply to 108.3 million barrels daily by next year, up from less than 101 million barrels daily this year.
Economists warn that the prolonged conflict and high energy costs will continue to strain the global economy. The International Monetary Fund forecasts a 3.4% global economic expansion next year but cautions that resilience is waning. Central banks and governments face limited options to mitigate the inflationary pressures, with temporary relief measures unsustainable in the long term. For now, the world must cope with higher energy costs, as the outlook for peace in the Middle East and other conflict zones remains uncertain.