Oil supply disruptions now threaten fuel prices into 2027

Oil supply disruptions tied to the US-Iran war are expected to average 600,000 barrels per day through next year as EIA raised fuel forecasts.

The estimate keeps the Strait of Hormuz at the center of the energy shock. The waterway handled an average of 4.9 million barrels per day in the second quarter, down from 21.6 million in the last quarter of 2025, according to the US Energy Information Administration’s Short-Term Energy Outlook.

Hormuz flows stay reduced

The comparison gives the disruption its scale. The EIA’s second-quarter estimate was less than one-quarter of the pre-war flow cited for late 2025, before US and Israeli attacks on Iran changed shipping patterns across the Gulf.

A temporary memorandum of understanding did not restore volumes to the earlier level, according to the figures in the outlook. An agreement involving Iran and Oman to reopen the strait has not been reached, while officials have described the negotiations as active.

Real-time measurement remains uneven. Ships that disable tracking systems can obscure cargo movement, and that has left market participants with different readings of traffic through the channel.

Energy Secretary Chris Wright said about 9 million barrels per day exited the strait on average over the past week. That figure is above the EIA’s second-quarter average of 4.9 million barrels per day, but still below the late-2025 benchmark used in the report.

Fuel forecasts move higher

The EIA also raised its retail fuel estimates. Its 2026 gasoline forecast increased 3.7% from the prior month’s estimate, while its 2026 diesel forecast rose 5.4% on the same basis.

The agency’s 2027 retail gasoline forecast moved up by 6.5% from the estimate released a month earlier. For consumers, the mechanism is direct: lower export capacity from a major transit route can tighten available supply, and that can feed into refined-product pricing if it persists.

The report also showed that shut-in Middle East production eased in July. Output held back from the market averaged about 5.5 million barrels per day in July, down from 7.5 million barrels per day in June, according to the EIA.

That relief may be temporary under the agency’s current assumptions. The EIA expects shut-ins to rise again to 6.6 million barrels per day in the third quarter, compared with the July average of 5.5 million.

Storage limits curb producers

Several Middle Eastern producers have cut output as restricted access to international buyers strains storage capacity. When crude cannot move through export routes at normal volumes, inventories can fill and force producers to reduce wells or defer shipments.

The report assumes threats to vessels carrying Saudi Arabian crude through the Bab el-Mandeb Strait have not created additional production shut-ins. That assumption matters because Bab el-Mandeb is a separate chokepoint from Hormuz, and simultaneous disruption at both routes would narrow options for Gulf exporters.

If that Bab el-Mandeb assumption holds, the EIA expects most production and trade flows to need until early 2027 to return to pre-war levels. The macro effect would be a longer period of fuel-price pressure than the agency expected a month earlier, with inflation risks tied to transport and refining costs.

If Hormuz talks instead produce a durable reopening, the specific pressure on Gulf producers would ease first through export volumes and storage space. The wider oil sector would then watch whether tanker traffic normalizes fast enough to reduce the 600,000-barrel-per-day disruption expected through next year.

If vessel threats expand beyond the report’s assumption, the risk shifts from delayed normalization to a wider shipping constraint. That would test refiners’ access to crude, raise the value of alternative routes and keep attention on weekly traffic estimates rather than monthly averages.