• The U.S. EIA projects global oil output and trade flows to return to pre-conflict levels by late 2026 or early 2027, even if the Strait of Hormuz remains disrupted.
  • Iran-related production shut-ins are expected to peak at about 10.8 million barrels per day in May 2026, as U.S. pressure continues.
  • If the Strait remains closed through late June, crude prices could run about $20 per barrel higher than forecasts assuming a May reopening.

The U.S. Energy Information Administration has released a fresh outlook suggesting that global oil markets are on a path toward normalization by early 2027, despite ongoing risks in the Strait of Hormuz. The agency expects output and trade flows to recover to pre-conflict levels within that timeframe, even if the strategic waterway remains partially blocked.

According to the EIA, production shut-ins related to the Iran conflict will peak in May 2026 at roughly 10.8 million barrels per day. The cuts are largely driven by U.S.-led pressure on Tehran, which has forced the country to reduce output significantly.

Price Scenarios Depend on Hormuz Duration

The outlook highlights the critical role of the Strait of Hormuz, through which about 20% of global oil passes. If the strait remains closed through late June, crude prices could be about $20 per barrel higher than in a scenario where it reopens in late May. The agency’s baseline forecast assumes a reopening in late May, but analysts warn that protracted disruption could keep prices elevated into mid-2026.

“The market is pricing in a significant risk premium,” said a trader familiar with the EIA’s models, speaking on condition of anonymity. “If the blockage persists, we could see sustained upward pressure.”

The projections come amid heightened geopolitical volatility, with the U.S. and Iran locked in a tense standoff. While the EIA’s base case anticipates gradual easing of tensions, it acknowledges that diplomacy remains fragile. A longer blockade would force refiners and traders to seek alternative routes and draw down strategic stocks, potentially amplifying price swings.

Market Response and Supply Adjustments

Higher prices are expected to spur additional activity in U.S. shale fields, contributing to a rise in non-OPEC output by 2027. The EIA’s model envisions this supply response as a key factor in rebalancing the market. However, near-term volatility could persist as traders react to every twist in the Hormuz situation.

Attempts to reach the EIA for additional comment were not immediately successful. The agency is scheduled to release its next Short-Term Energy Outlook in two weeks.

Correction: A previous version of this article incorrectly stated the peak shut-in level. The correct figure is 10.8 million barrels per day, as provided by the EIA.