# EIA slashes oil price forecast 14% after U.S.-Iran deal reopens Strait of Hormuz

By MarketScale Newsroom · Published 2026-07-17 · Updated 2026-09-01 · Energy on MarketScale
Canonical: https://www.marketscale.com/industries/energy/eia-slashes-oil-price-forecast-14-after-us-iran-deal-reopens-strait-of-hormuz

> The EIA cut its 2026 Brent crude forecast by 14% to $82/b and its 2027 forecast by 18% to $65/b, as a June 18 U.S.-Iran MOU reopened the Strait of Hormuz.

## Key points

- The U.S. and Iran reached an agreement that reopens the Strait of Hormuz.
- The reopening eases a five-month oil supply crisis.

Brent crude spot prices fell below $70 per barrel on July 1, nearly matching where they stood before the Strait of Hormuz closed in late February. That rapid reversal is now embedded in the U.S. Energy Information Administration's July 2026 Short-Term Energy Outlook, which cuts the agency's full-year 2026 Brent forecast by 14% to $82 per barrel and its 2027 forecast by 18% to $65 per barrel.

The revision follows a June 18 memorandum of understanding between the United States and Iran that ended the conflict, reopened the strait, and triggered a measurable jump in tanker traffic through the region. The strait had been effectively closed since February 28, disrupting the flow of crude oil and petroleum products through one of the world's most critical chokepoints.

## Production shut-ins peaked at 11.2 million b/d, recovery is underway

EIA estimates that crude oil shut-ins across seven major Middle East producers peaked at 11.2 million barrels per day in May before pulling back to approximately 8.3 million b/d in June. Saudi Arabia accounted for the single largest disruption, with an estimated 2.66 million b/d still offline in June. Iraq and Kuwait together contributed roughly another 4.3 million b/d of shut-ins that month.

EIA's current forecast has aggregate disruptions falling to 5.4 million b/d in Q3 2026 and to 1.4 million b/d in Q4, with the majority of idled capacity expected back online in Q1 2027. The agency notes that much of the tanker traffic now moving through the strait consists of previously stranded vessels, which means inventory rebuilding will take most of Q3 before supply gains become broadly visible in price signals.

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## Global inventories swing from deep draws to rebuilding

Global oil inventories drew at an average of 5.1 million b/d in Q2 2026. EIA's June forecast projected a draw exceeding 7 million b/d in Q3; the July update revises that figure down to 2.2 million b/d as supply returns faster than previously expected. By Q4, the agency expects inventories to flip to a build of 2.7 million b/d, rising to 5.0 million b/d throughout 2027 as production outpaces consumption.

OECD commercial crude oil and liquids inventories are now forecast at 2,604 million barrels for full-year 2026, up 15% from the June projection of 2,269 million barrels. By 2027, that figure climbs to 3,021 million barrels. Restocking of strategic reserves will temper some of the resulting downward price pressure, but the agency expects a return to pre-conflict conditions of market oversupply.

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## Gasoline relief coming in Q3, but crack spreads keep it partial

U.S. retail gasoline prices averaged more than $4.20 per gallon in Q2. EIA projects a drop to $3.80/gal in Q3, driven by lower crude costs. However, tight gasoline inventories are keeping crack spreads elevated, meaning the crude cost relief will only partly reach the pump in the near term. As inventories rebuild and peak summer demand passes, EIA forecasts retail prices falling further to around $3.40/gal in Q4 2026 and below $3.10/gal as an annual average in 2027.

Inventory pressure on gasoline built through April and May, when stocks fell below the five-year range. Refiners prioritized jet fuel and distillate production during the conflict period, constraining domestic gasoline output. Net gasoline imports also declined as Gulf Coast exports surged and Atlantic Basin supply into the East Coast became costlier.

## Power sector: lower wholesale prices, rising gas demand ahead

Natural gas prices at Henry Hub are forecast to average close to $3.70 per million BTU in 2026 before easing below $3.50 in 2027, supported by record U.S. production. Wholesale electricity prices nationally are projected to average roughly $45 per megawatthour this summer, below last summer's levels, with the largest declines in western hubs and the Midcontinent ISO. EIA flags heatwaves as a risk that could still produce price spikes.

Looking further ahead, EIA expects U.S. natural gas consumption in the electric power sector to set a record in 2027, driven by overall electricity demand growth and an expanding natural gas generating fleet. Solar's share of generation is projected to rise from 8% in 2026 to 9% in 2027, while coal's share edges down from 15% to hold there through 2027. LNG exports continue climbing, from 17 billion cubic feet per day in 2026 to 19 billion in 2027.

## What this means for your team

- Fuel and energy budget assumptions built on Q2 2026 pricing are likely overstated. EIA's revised trajectory points to sustained relief through 2027, making now a reasonable time to revisit forward contracts and hedge positions against a $65/b Brent baseline.
- Gasoline crack spreads remain elevated despite falling crude costs, so fleet and logistics operators should not expect pump prices to drop in lockstep with crude immediately. Meaningful relief at the retail level is more likely in Q4 2026 as inventories rebuild.
- Power procurement teams in western and Midcontinent ISO markets stand to see the sharpest wholesale electricity price declines this summer. Evaluate whether current fixed-rate contracts still make sense or whether spot exposure could reduce costs.
- Monitor Q1 2027 closely. EIA's forecast hinges on the majority of Middle East shut-in capacity returning by that quarter. A slower-than-expected restart would reduce inventory builds and put upward pressure on prices relative to current projections.

## Sources

- [Short-Term Energy Outlook, July 2026](https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf) (U.S. Energy Information Administration)

Tags: EIA, Short-Term Energy Outlook, crude oil, Brent crude, Strait of Hormuz, natural gas, gasoline prices, energy procurement, supply chain, electricity prices, oil markets, energy management

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