Published on: 2026-08-12
The EIA expects around 600,000 barrels per day of Middle East oil disruption to remain through the end of 2027, extending an energy supply shock the Federal Reserve already identifies as a source of inflation pressure. Brent moved back toward $90 on Wednesday after the U.S. Energy Information Administration raised its Q3 price forecast by $11 in one month. The agency now sees Brent averaging about $85 this quarter as severe constraints on Strait of Hormuz traffic keep production offline and drain global inventories.
EIA raised its Q3 Brent forecast from $74 to $85 per barrel, an $11 increase from July.
Hormuz carried an average 4.9 million barrels per day in Q2, down from 21.6 million bpd before the conflict, while July production shut-ins averaged 5.5 million bpd.
Global oil inventories fell by 4.2 million bpd in Q2, with another 3.8 million bpd draw forecast for Q3.
EIA expects most production to recover in early 2027, although around 600,000 bpd of disruption could remain through year-end 2027.
EIA expected Brent to average $74 in Q3 in its July outlook. By August, that forecast had jumped to $85 after renewed attacks on vessels and lower shipments through Hormuz forced the agency to increase its estimates for shut-in Middle East production. EIA assessed July shut-ins at 5.5 million bpd and now assumes severe transit constraints will persist through August.
Brent was trading around $89.63 early Wednesday, after closing Tuesday at its highest level since July 31. The latest rise followed fading hopes of a U.S.-Iran agreement and further attacks on shipping, keeping the market well above the price EIA expected only a month ago.
Oil and petroleum-liquid flows through Hormuz averaged 4.9 million bpd in Q2, compared with 21.6 million bpd in Q4 2025 before the conflict. Shipping remains heavily restricted in August. Only six vessels passed through the Strait on Monday, according to data cited by Reuters, against a 10-day average of about 11 and a prewar daily average of 125 to 140 vessels.
The supply loss is also visible in inventories. EIA estimates global stocks fell by an average of 4.2 million bpd in Q2 and forecasts another 3.8 million bpd draw in Q3. Existing inventories are filling part of the gap left by disrupted production, providing physical support for EIA’s higher near-term oil forecast.
EIA’s revision extends beyond crude. Its August outlook raised the 2026 wholesale gasoline forecast by 5.9% from July and the wholesale diesel forecast by 8.5%. EIA is therefore forecasting higher U.S. fuel costs even while expecting crude prices to decline later in the year.
The Federal Reserve entered this period with inflation still above its 2% goal. Its July 29 statement specifically attributed part of the pressure to supply shocks that had raised prices in sectors including energy. The FOMC held the federal funds target at 3.50% to 3.75%, with three members voting for a 25-basis-point increase. EIA still expects Brent to average $69 in 2027 as most production returns, so the policy risk comes from how long energy pressure persists rather than an assumption that oil stays near $90.
EIA assumes Hormuz flows will begin increasing slowly in September, allowing shut-in production to restart and Brent to fall toward an average $78 in Q4. The August outlook was completed on August 6 and released August 11, before the latest deterioration in shipping conditions. On Tuesday, Iran’s top security official said the Strait would remain closed unless Washington accepted Tehran’s conditions for ending the war.
A sustained recovery in vessel traffic would support EIA’s expected decline in oil prices as more production returns and inventory losses slow. If severe restrictions continue into September, the assumptions supporting the $78 Q4 forecast weaken and the energy shock confronting the Fed lasts longer.
No. EIA assumes severe restrictions persist through August before flows begin increasing in September, with most regional crude production returning near pre-conflict levels in early 2027. The agency expects a smaller disruption of roughly 600,000 bpd to remain through the end of 2027.
Some production can use alternative routes. Saudi Arabia can redirect oil through its East-West pipeline toward the Red Sea and use routes involving the Suez Canal and Egypt’s Sumed pipeline. EIA says these alternatives take longer, cost more and have less capacity.
Yes. EIA itself expects Brent to average $69 in 2027 despite forecasting some disruption through year-end. Its price decline assumes most shut-in production returns and global oil inventories start rebuilding during the first quarter of 2027.
The next Short-Term Energy Outlook is scheduled for September 9, 2026. EIA’s current August forecast was completed on August 6, making September shipping and production data the first test of its recovery assumption.
EIA will formally update its outlook on September 9, while shipping data should show earlier whether its recovery path is holding. If September begins without a sustained rise in Hormuz traffic and restart of shut-in production, EIA’s $78 Q4 Brent forecast will be the number under pressure.
