In their latest Short-Term Energy Outlook (STEO), the EIA revised its expectations for global oil balances as the US and Iran signed a Memorandum of Understanding (MoU) to end the conflict and open the Strait of Hormuz. As a result, the agency expects the global oil market to be back in surplus by Q4 2026.
Following the agreement, tanker traffic through the Strait of Hormuz rebounded rapidly, allowing previously stranded crude exports to reach global markets again. The EIA estimates Middle Eastern production shut-ins averaged 8.29 MMBbl/d in June after peaking above 11 MMBbl/d in May but expects remaining disruptions to fall to just 1.44 MMBbl/d by the fourth quarter. Despite recovering supply, global oil inventories are still forecast to draw by 2.2 MMBbl/d in 3Q26 as stranded cargoes work through the system before shifting to builds in 4Q26 as supply once again outpaces demand.
On the demand side, the EIA says elevated fuel prices, supply shortages, and government conservation measures reduced global oil consumption during the conflict, particularly across Asia. The agency lowered its 2026 demand estimate to 102.8 MMBbl/d but expects consumption to rebound by 2.0 MMBbl/d next year to 104.8 MMBbl/d as prices ease and supply flows normalize.
Reflecting the improved market balance, the EIA sharply reduced its crude price outlook. WTI is now forecast to average $71/Bbl in 3Q26, down from $95.45/Bbl in last month's STEO, while the 4Q26 forecast was lowered from $84/Bbl to $66/Bbl. The agency also reduced its 2027 forecast to $60.76/Bbl from $74.39/Bbl, reflecting expectations that inventories will rebuild as the market returns to oversupply.
Overall, the EIA expects the reopening of the Strait of Hormuz to accelerate the transition from a geopolitically driven market back to one dominated by fundamentals, with recovering supply placing sustained downward pressure on crude prices through 2027.