Global oil markets are under sustained pressure from the war with Iran. The U.S. Energy Information Administration (EIA) on Tuesday sharply raised its oil price forecasts for this year and next, citing accelerating declines in global inventories, a persistently tight diesel market, and the far-from-faded impact of disrupted oil flows through the Strait of Hormuz.

According to the EIA's latest Short-Term Energy Outlook, the average Brent crude price forecast for 2026 has been raised to about $98 per barrel, 8% higher than its previous projection.

Meanwhile, the average Brent price for the fourth quarter is projected at about $105 per barrel, 15% higher than the EIA's earlier estimate.

U.S. retail diesel prices hit a record high last month, and the EIA expects them to remain above $6 per gallon in October. High oil prices directly push up energy costs, putting real pressure on businesses and consumers.

As of press time on Tuesday, Brent crude futures were up 0.22% at $100.54 per barrel.

War Disrupts Hormuz Passage, Supply Gap Hard to Close in the Short Term

The U.S.-Israeli war against Iran is the core driver of this round of oil price increases.

After the war broke out, oil flows through the Strait of Hormuz—which before the conflict carried about 20% of global oil supply—were severely disrupted. Iran also retaliated against U.S. military strikes by attacking energy infrastructure in the region, further intensifying supply tightness.

EIA data show that current global crude production disruptions amount to 4.5 million barrels per day. This gap is pushing up spot prices while also causing global inventories to be drawn down rapidly.

The diesel market is especially strained. The EIA expects U.S. retail diesel prices to decline slowly, but even through 2027 the average is still expected to be about $4.50 per gallon, remaining above historically normal levels.

Alternative Routes Emerge, Gulf Oil Flows Gradually Recover

Despite the severe situation, some oil-producing countries have begun opening detour options to restore exports.

Saudi Arabia has restarted its pipeline through the East-West corridor to the Red Sea, a route that can bypass the Strait of Hormuz. At the same time, regional exporters have begun using so-called "dark transfers"—turning off tanker tracking systems before transferring cargo at sea—to evade attacks on shipping and energy infrastructure.

These measures have begun to show results. According to the EIA, oil export flows from the Gulf region (excluding Iran) in September have recovered to more than 81% of pre-war levels.

EIA Expects Oil Prices to Fall in 2027, But Still Above Earlier Baseline

The EIA expects Middle East oil production and exports to recover gradually as transit conditions through the Strait of Hormuz improve and alternative export routes continue to expand.

Inventories will then be replenished, and the average Brent crude price forecast for 2027 is about $84 per barrel—although still $10 higher than the EIA's previous forecast, it represents a significant decline from current levels.

On the production side, the EIA expects global crude production disruptions to fall from 4.5 million barrels per day in the fourth quarter of 2026 to 2.7 million barrels per day in the first quarter of 2027, with supply and demand gradually moving toward balance. However, the direction of the geopolitical situation remains the biggest uncertainty affecting this path.