The U.S. Energy Information Administration on Tuesday raised its oil price forecasts for this year and next, pointing to a rapid decline in global inventories and a persistent diesel shortage caused by the ongoing war with Iran.
The agency now expects Brent crude, the global benchmark, to average about $98 a barrel in 2026, an 8% increase from its previous forecast, according to its Short-Term Energy Outlook.
Oil and fuel prices have climbed sharply because of the war waged by the United States and Israel against Iran, which has disrupted oil flows through the Strait of Hormuz. About 20% of the world’s oil supply moved through that waterway before the war. Iran has also attacked regional energy infrastructure in response to U.S. military strikes.
The drop in global inventories and the shortage of diesel supply are expected to keep crude prices high. Brent is projected to average about $105 a barrel in the fourth quarter, $14 more than the EIA’s earlier estimate.
U.S. retail diesel prices, which hit record highs last month, will stay above $6 a gallon in October before gradually falling to an average of roughly $4.50 a gallon in 2027.
Still, Middle East oil production and exports are expected to recover gradually as transit through the strait improves and producers turn to alternative routes and ship-to-ship transfers.
As flows recover and inventories are replenished, Brent is forecast to average $84 a barrel in 2027, the EIA said, $10 more than its previous projection.
Flows have improved because Saudi Arabia has resumed shipments through its East-West pipeline to the Red Sea, bypassing the Strait of Hormuz. Regional exporters have also adapted to attacks on shipping and energy infrastructure by using so-called “dark transits,” in which tankers switch off tracking systems before transferring cargo at sea.
Those measures helped Gulf oil flows, excluding Iran, recover in September to more than 81% of pre-war levels.
As these alternative solutions spread, crude production disruptions are expected to fall from 4.5 million barrels per day in the fourth quarter of 2026 to 2.7 million bpd in the first quarter of 2027, according to the agency.
