US Expects Oil Disruptions from US-Iran Conflict to Last Until End of 2027
The latest Short-Term Energy Outlook from the US Energy Information Administration (EIA) indicates that oil supply disruptions caused by the US-Iran war are expected to remain at about 600,000 barrels per day until the end of 2027, as the conflict continues to restrict oil transport through the Strait of Hormuz.
In the second quarter, the average daily oil transport volume through the Strait of Hormuz dropped to 4.9 million barrels, significantly lower than the 21.6 million barrels in the fourth quarter of 2025, before the conflict erupted, when the strait accounted for about one-fifth of global maritime oil flow.
In July, the average production shutdown in the Middle East was about 5.5 million barrels per day, down from 7.5 million barrels in June, but is expected to rebound to 6.6 million barrels per day in the third quarter, as multiple countries are forced to cut production due to limited export channels and storage pressures.
The US Energy Secretary stated that the average daily oil output from the strait in the past week was about 9 million barrels, indicating a recovery in flow, but still far below pre-war levels, as shipping risks and insurance costs continue to suppress willingness to transit.
The EIA assumes that if threats in the Mandeb Strait do not lead to additional shutdowns, production and trade patterns could largely return to pre-conflict status by early 2027, but the overall supply gap will persist until the end of 2027.
In market mechanisms, event-driven supply contractions are raising global inventory consumption and oil price premiums, with capital flowing to non-Middle Eastern producers like the US and Brazil, as well as strategic reserve releases. Middle Eastern producers and Asian refineries reliant on strait transport are under pressure, while consuming countries face ongoing fuel price and inflation pressures.
The EIA has simultaneously raised its gasoline and diesel price forecasts for 2026 and further revised its retail gasoline price forecast for 2027.
Source: Public Information
ABAB AI Insight
The US Energy Information Administration has repeatedly revised upward the scale of supply losses in the Middle East, adjusting its initial peak estimate of about 9.1 million barrels per day to over 10 million barrels per day, reflecting a reassessment of the persistence of the Hormuz blockade, similar to the long-term supply scars following the Iranian Revolution in 1979.
On the capital front, the US is offsetting the gap through the release of strategic petroleum reserves and domestic production increases, while accelerating non-Middle Eastern exports, motivated by the desire to maintain global market stability and weaken adversaries' oil revenues, with resources being directed from SPR and shale areas to Asian and European consumer markets.
Similar cases can be seen in the slow recovery after the supply disruptions during the Gulf War in 1990-1991 and the redirection of trade following sanctions on Russia in 2022. Currently, Middle Eastern oil-producing countries are in a phase of forced production cuts and storage limits.
The structural judgment indicates a transfer of pricing power, with the mechanism being that changes in physical control of key straits alter the global marginal supply curve for crude oil, allowing non-Middle Eastern producers to gain premium pricing space while forcing consuming countries to accelerate diversification of procurement and rebuild reserves.
ABAB News · Cognitive Law
The control of the strait determines the duration of oil price premiums.
The greater the supply shock, the longer the premium for non-conflict production areas.
The speed of inventory consumption determines the crisis transition from short-term premiums to structural shortages.