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| Estimated Strait of Hormuz closure-related disruptions in crude oil production (‘000 bpd) | ||||
| Country | Production (February 2026) | Estimated shut-ins (Mar-Jun’26 average) | Estimated shut-ins July 2026 | Estimated shut-ins August 2026 |
| Kuwait | 2,560 | 1,648 | 850 | 680 |
| UAE | 3,600 | 925 | 0 | 0 |
| Iran | 3,390 | 455 | 200 | 1,000 |
| Iraq | 4,400 | 2,880 | 1,720 | 1,160 |
| Qatar | 557 | 463 | 150 | 200 |
| Bahrain | 193 | 143 | 110 | 130 |
| Saudi Arabia | 10,500 | 2,923 | 1,950 | 3,550 |
| Total | 25,200 | 9,435 | 4,980 | 6,720 |
Source: United States Energy Information Administration (EIA)
The EIA expects these measures to restrict Iran’s crude oil exports and reduce its production. The agency’s assessment comes against the backdrop of broader disruptions to Middle Eastern energy infrastructure and shipping routes, which have made it increasingly difficult for producers to maintain normal export flows. As a result, concerns over the availability of physical crude have supported benchmark prices despite uncertainty over the longer-term trajectory of global oil demand.
Saudi exports disrupted
The supply situation was further complicated by attacks targeting Saudi Arabia’s oil export infrastructure and shipping routes through the Bab el-Mandeb Strait, another major global oil transit chokepoint. The attacks reduced crude oil exports from Saudi Arabia’s Yanbu port on the Red Sea, a strategically important route that normally allows the kingdom to bypass the Strait of Hormuz.
According to estimates from Vortexa, Saudi crude oil exports from Yanbu fell by around half in August from July. The decline has forced Saudi Arabia to adjust its export logistics and seek alternative routes to maintain supplies to international customers. Saudi Arabia has increased oil shipments through the Suez Canal at the northern end of the Red Sea. However, this route is longer and more expensive for customers in Asia compared with traditional supply routes. Higher transportation costs and longer voyage times are therefore adding to the logistical burden facing Asian refiners.
Saudi Arabia has also reportedly started using ship-to-ship transfers outside the Persian Gulf to facilitate exports. However, the constrained shipping environment in the Red Sea is expected to limit the kingdom’s ability to fully restore exports in the near term. The situation is likely to remain challenging until global shipping flows adjust to the disruption and alternative transportation arrangements become more established.
Production shut-ins rise
The combined impact of constrained flows through the Strait of Hormuz and the Bab el-Mandeb Strait has resulted in a significant increase in crude oil production shut-ins. The EIA estimates that average production shut-ins rose to 6.7 million barrels per day (bpd) in August from 5.0 million bpd in July. The increase highlights the growing disconnect between crude oil production capacity and the ability to physically transport oil to consuming markets. Even where producers retain the technical ability to pump crude, restricted access to shipping routes and export infrastructure can force them to curtail production.
The EIA expects oil flows from the Middle East to remain constrained through the fourth quarter of 2026. Production shut-ins are projected to average 5.7 million bpd during the quarter, indicating that supply disruptions are likely to remain a significant feature of the global oil market through the end of the year. However, the agency expects the situation to gradually improve as producers, traders and shipping companies develop alternative mechanisms to move crude oil out of the region.
Alternative routes offer some relief
The EIA expects oil flows from the Middle East to gradually increase as shippers continue to develop workarounds to overcome restrictions on conventional export routes. These include greater use of pipeline and overland bypass routes, increased ship-to-ship transfers and additional pipeline capacity. The United Arab Emirates is also expected to bring new bypass pipeline capacity online in mid-2027. Such infrastructure could provide producers with additional options for transporting crude without relying entirely on the Strait of Hormuz.
If these assumptions materialise, the EIA expects most production and trade flows to return to pre-conflict averages by the second quarter of 2027. However, the recovery is unlikely to be uniform across the region. Some oil producers around the Persian Gulf may remain unable to restore output to pre-conflict averages during the forecast period because of continuing logistical and infrastructure constraints. The gradual normalisation of supply flows will therefore depend not only on the easing of geopolitical tensions but also on the ability of the region’s producers and shipping industry to establish reliable alternative export channels.
Inventory losses
The prolonged disruption to oil production and exports has already resulted in a substantial drawdown in global crude inventories. The EIA estimates that global oil inventories declined by an average of 3.9 million bpd between April and June 2026. The agency expects inventories to fall by a further 3.0 million bpd on average during the July-September quarter and by another 1.7 million bpd during October-December. Continued inventory depletion provides a fundamental underpinning to crude oil prices because declining stockpiles reduce the cushion available to absorb additional supply disruptions.
As a result, the EIA has raised its outlook for Brent crude oil prices. The Brent spot price is now projected to average around US$ 90 a barrel during the second half of 2026, US$ 8 a barrel higher than its previous monthly forecast. The upward revision reflects the combination of prolonged supply disruptions, falling inventories and uncertainty surrounding the timing of a full recovery in Middle Eastern oil exports.
Prices may ease in 2027
The EIA expects the oil market to gradually rebalance as Middle Eastern exports recover and shut-in production returns to the market. Under its current assumptions, Brent crude oil prices are projected to decline to an average of US$ 77 a barrel during the April-June 2027 quarter. The decline is expected to gather momentum as most of the shut-in production is restored during the second half of 2027. A recovery in production and trade flows would eventually allow global oil inventories to resume building, putting downward pressure on prices.
The EIA projects Brent crude oil prices to average around US$ 67 a barrel in the second half of 2027 as inventories rebuild and supply conditions normalise. However, the path towards lower prices is unlikely to be smooth. The agency cautioned that continued volatility in crude oil flows through the Strait of Hormuz and alternative export routes could result in substantially greater short-term price swings than indicated by the forecast.
For the global oil market, therefore, the immediate outlook remains closely tied to the physical availability and movement of Middle Eastern crude. While alternative pipelines, overland routes and ship-to-ship transfers can gradually mitigate the impact of disrupted maritime corridors, they cannot immediately replace the scale and efficiency of established export channels.
The combination of depleted inventories, elevated production shut-ins and uncertain shipping routes is likely to keep crude oil prices volatile in the near term. Any improvement in geopolitical conditions and a sustained recovery in Middle Eastern exports could accelerate the decline in prices, while renewed disruptions to the Strait of Hormuz or Bab el-Mandeb could quickly restore the risk premium and prolong the period of elevated oil prices.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
