The US anticipates oil disruptions from the Iran war to reach 600,000 barrels per day until the end of next year as conflict in the Strait of Hormuz constrains supplies.
Oil carried through the strait averaged 4.9 million bpd in the second quarter this year, well below the 21.6 million bpd in the last three months of 2025, the Energy Information Administration said in its latest short-term energy outlook.
New figures from the EIA estimate production shut-ins in the region averaged 5.5 million bpd last month. The EIA said its latest analysis assumes oil flows will slowly increase in September, prompting it to raise its forecast of blocked production in August. It does not assume recent blockade threats in the Bab Al Mandeb strait have resulted in more blocked supply.
“If these assumptions hold, we expect it will take until early 2027 for production and trade patterns to generally return to pre-conflict status,” the agency said.
Negotiations between the US and Iran to reopen the Strait of Hormuz – the chokepoint where 20 per cent of global energy supplies passed before the conflict began – remain at an impasse.
President Donald Trump has recently demanded that Iran pay compensation for deaths and damages linked to the war as Tehran said the strait will remain closed if the US does not accept its conditions, which include the lifting of American sanctions.
Earlier on Tuesday, US Energy Secretary Chris Wright said about 9 million barrels of oil passed through the waterway last week. He said in a post on X that total oil flows are averaging about 15 million bpd when including the 5 million to 7 million bpd leaving the region through newly upgraded pipelines and export facilities.
The EIA also noted a pick-up in activity in the Bab Al Mandeb strait as Saudi Arabia rerouted its crude oil flows away from the Strait of Hormuz through the East-West pipeline. The EIA said total oil flows through Bal Al Mandeb averaged 8.1 million bpd in the April-June period this year, up from an average of 5.4 million bpd in the fourth quarter of 2025.
Threats from Yemen's Houthi rebels to impose a blockade on Saudi oil exports through the Bab Al Mandeb prompted a new surge in oil prices, which had peaked at $105 a barrel on July 23. Brent crude was trading 1.07 per cent higher on Tuesday at $88.66 a barrel, with West Texas Intermediate trading 1.06 per cent higher at $83 a barrel.
“Because of the large drawdown in global inventories triggered by continued disruptions in the Strait of Hormuz, we forecast that oil prices will remain elevated until global oil flows return to normal and oil inventories are replenished,” the EIA said.
Brent crude oil's spot price will be an average of about $85 a barrel this quarter, $11 a barrel higher than the EIA's previous estimation. The agency said it expects Brent prices to average at $86 a barrel this year before gradually declining to $69 a barrel next year, assuming most blocked oil production is largely restored by the first quarter.
