Oil disruptions from Iran war to continue through next year, US says

The US predicts that oil disruptions stemming from the Iran war will persist through the coming year, with disruptions reaching 600,000 barrels per day by the end of 2026. The Strait of Hormuz, responsible for transporting 20% of global energy supplies, is currently experiencing conflict. In the second quarter of this year, oil passing through the strait averaged 4.9 million barrels per day, a significant decrease from the 21.6 million barrels per day recorded in the final quarter of 2025.

According to the Energy Information Administration's latest short-term energy outlook, production stoppages in the region averaged 5.5 million barrels per day last month. The EIA anticipates oil flows to gradually increase in September, which has prompted an upward revision to their blocked production forecast for August. The agency does not factor in recent threats to block the Bab Al Mandeb strait.

Negotiations between the US and Iran to reopen the Strait of Hormuz - the bottleneck through which 20% of global energy supplies passed before the conflict began - have thus far remained unresolved. President Trump recently demanded Iran compensate for losses and damages arising from the war, to which Tehran has responded with threats to keep the strait closed unless the US agrees to its terms, including lifting American sanctions.

On Tuesday, US Energy Secretary Chris Wright reported that approximately 9 million barrels of oil had passed through the waterway the previous week. He noted that total oil flows are currently averaging around 15 million barrels per day, which includes the 5 million to 7 million barrels leaving the region via newly upgraded pipelines and export facilities.

The EIA also observed a rise in activity via the Bab Al Mandeb strait, as Saudi Arabia diverted its crude oil exports through the East-West pipeline to circumvent the Strait of Hormuz. The EIA reported that total oil flows through the Bab Al Mandeb averaged 8.1 million barrels per day during the April-June period this year, up from an average of 5.4 million barrels per day in the fourth quarter of 2025.

Threats from Houthi rebels in Yemen to impose a blockade on Saudi oil exports through the Bab Al Mandeb have triggered a surge in oil prices, with Brent crude peaking at $105 a barrel on July 23. Brent crude traded 1.07% higher on Tuesday at $88.66 a barrel, while West Texas Intermediate gained 1.06% to $83 a barrel. The EIA expects oil prices to remain elevated until global oil flows return to normal and inventories are replenished.

Brent crude oil's spot price for this quarter is projected to average about $85 a barrel, $11 higher than the EIA's previous forecast. The agency anticipates Brent prices to average $86 a barrel this year, gradually declining to $69 a barrel next year, provided most blocked oil production is largely restored by the first quarter.