US expects oil supply disruptions through end of 2027

The United States now expects persistent oil supply disruptions stemming from the U.S.-Iran war to reach about 600,000 barrels per day through the end of next year. According to Transport Topics, the ongoing conflict continues to restrict shipments through the critical Strait of Hormuz, maintaining pressure on global energy markets as crude prices experience renewed volatility.

Estimates from the U.S. Energy Information Administration’s Short-Term Energy Outlook indicate that oil transported through the waterway averaged 4.9 million barrels per day in the second quarter of this year. This marks a stark contrast to higher volume averages of 21.6 million barrels per day recorded in the final quarter of 2025, prior to military actions launched against Iran by the U.S. And Israel.

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The conflict has entered a sixth month. Pakistan, alongside Qatar, played a key mediating role in facilitating a memorandum of understanding between Iran and the U.S. In June to end the recent conflict between the two countries, as reported by Anadolu Agency. Continuing these diplomatic efforts, Iranian Foreign Minister Abbas Araghchi held talks with Pakistan's Interior Minister Mohsin Naqvi in Tehran on Tuesday concerning bilateral ties and ongoing mediation efforts, following a previous visit by Iranian Interior Minister Eskandar Momeni to Islamabad. Meanwhile, a separate deal between Iran and Oman to reopen the strait remains elusive, although officials indicate talks are progressing.

Energy Secretary Chris Wright noted that the volume of oil moving through the Strait of Hormuz remains difficult to track in real time because vessels are going dark, leading to discrepancies among market participants. Wright stated that about 9 million barrels of oil a day exited the strait on average over the past week. Middle East production shut-ins have fluctuated, easing to an average of about 5.5 million barrels a day in July compared to 7.5 million barrels a day in June, before being projected to swell again to 6.6 million barrels a day in the third quarter as limited access to global markets strains available storage capacity across multiple Middle Eastern countries forced to curtail output.

The fallout from these energy pressures extends far beyond the Middle East, rattling financial markets globally according to Yahoo Finance Australia. In Australia, the benchmark ASX 200 closed down 41.20 points, or 0.45 per cent, to 9209.40 on Wednesday as investors weighed domestic economic warnings against ongoing oil price volatility linked to Middle East tensions. Global X senior investment strategist Marc Jocum noted that broader market sentiment was heavily weighed down by caution over oil price fluctuations alongside key U.S. Inflation data, while oil prices once again hit investor sentiment as Brent Crude briefly surpassed US$90 a barrel before settling at $US88 a barrel. The domestic economic caution was further compounded by results from Commonwealth Bank, where chief executive Matt Comyn warned of a slowing national economy driven by higher interest rates and inflation, alongside a 15 per cent slump in mortgage demand since May 2026.

Higher energy costs are directly impacting consumers worldwide. The EIA hiked gasoline and diesel price forecasts for 2026 by 3.7% and 5.4%, respectively, and increased its 2027 forecast for retail gasoline prices by 6.5% from its estimates a month earlier, driving up inflation expectations across transport and retail sectors as supply chains adjust to restricted maritime routes.

Market and Supply Impact Overview

• Supply Disruptions: Projected to reach about 600,000 barrels per day through the end of next year.
• Strait of Hormuz Traffic: Volumes dropped sharply to 4.9 million barrels per day in the second quarter compared to pre-war averages of 21.6 million barrels per day at the end of 2025.
• Production Shut-ins: Curtailments eased to 5.5 million barrels a day in July from 7.5 million barrels a day in June, but are projected to swell to 6.6 million barrels a day in the third quarter as storage capacities are strained by limited market access.
• Price Forecasts: EIA hiked 2026 gasoline and diesel forecasts by 3.7% and 5.4%, and raised 2027 retail gasoline forecasts by 6.5%.

The EIA report assumes that recent threats to vessels carrying Saudi Arabian crude through the Bab el-Mandeb Strait have not resulted in additional production shut-ins. If that assumption holds, the agency expects most production and trade flows to take until early 2027 to return to pre-war levels.