EIA Raises Brent Price Forecast Amid Middle East Conflict and Shipping Disruptions

The U.S. Energy Information Administration (EIA) raised its global oil price outlook in the latest Short-Term Energy Outlook (STEO), following the escalation of conflict in the Middle East and disruptions affecting shipping through the Strait of Hormuz. The updated outlook projects Brent crude will average $78.84 per barrel in 2026 and $64.67 per barrel in 2027.

Prices surged shortly after military action began on February 28. Brent climbed from an average of $71 per barrel on February 27 to $104 per barrel by March 9, reflecting growing concerns about supply disruptions and tanker traffic in one of the world's most critical energy corridors.

Strait of Hormuz Driving Market Uncertainty

Much of the recent price strength is tied to disruptions surrounding the Strait of Hormuz, a strategic chokepoint through which nearly 20% of global oil supply typically flows.

While the strait has not been physically blocked, heightened security risks and the cancellation of insurance coverage have led many vessels to avoid the route. Reduced tanker traffic has already forced some regional producers to shut in production.

If shipping activity remains constrained, storage capacity behind the chokepoint could fill quickly, requiring additional production shut-ins and providing further support to oil prices.

Brent Expected to Peak in Second Quarter

The EIA expects geopolitical risk and temporary supply disruptions to keep prices elevated through the near term. Brent is expected to average about $91 per barrel in the second quarter of 2026, before easing later in the year as oil flows gradually normalize.

For 2027, the EIA expects prices to continue trending lower, averaging between $63 and $66 per barrel.

Higher Prices Support U.S. Production Growth

Stronger prices are also expected to encourage additional U.S. crude oil production. Domestic output is forecast to average 13.6 million bpd in 2026, rising to 13.8 million bpd in 2027. The 2027 projection is 0.5 million bpd higher than last month's estimate, reflecting stronger market signals for producers.

Supply Growth Expected to Outpace Demand

Despite near-term disruptions, the outlook still points to increasing global supply once shipping activity through the Strait of Hormuz stabilizes.

Production shut-ins are expected to peak in early April, primarily in Iraq, with smaller volumes in Kuwait, the United Arab Emirates, and Saudi Arabia. As transit through the strait gradually resumes, global production is projected to exceed consumption.

Global inventories are forecast to increase by about 1.9 million bpd in 2026 and 3.0 million bpd in 2027, which would put downward pressure on prices later in the forecast period.

OPEC+ Production Adds Additional Supply

The outlook also incorporates recent production decisions from OPEC+, which agreed on March 1 to begin increasing supply by 206,000 barrels per day starting in April 2026.

However, the EIA expects the alliance to remain cautious with additional supply increases in 2027 due to the projected inventory builds. Future production decisions will also depend on how long disruptions in the Strait of Hormuz persist.

Markets Facing Elevated Risk Premium

Although physical damage to energy infrastructure has been limited so far, the conflict has introduced a substantial risk premium to oil prices.

With tensions between the United States, Israel, and Iran continuing to escalate, analysts warn that the conflict could create the most severe disruption to global energy markets since the 1970s. While the EIA expects oil flows to eventually normalize and inventories to build, the near-term outlook for energy markets remains heavily influenced by the developments in the Middle East, one of the world's most critical oil-producing regions.