-- The global oil market is set to remain under severe strain through 2026 as conflict involving Iran continues to disrupt flows via the Strait of Hormuz, Oxford Institute for Energy Studies strategists said in a note on Thursday.
Gulf supply outages are estimated to have reached 12.1 million barrels per day in March, and are projected to climb to 12.7 million b/d in April compared with pre-war February levels, underscoring the scale of the disruption.
The institute's base case assumes the conflict peaks in April, followed by gradual de-escalation, allowing flows through the Strait to recover to over 95% of normal levels only by Q4. Global oil supply is forecast to contract by 1.7 million b/d in 2026 before rebounding by 3.4 million b/d in 2027.
OPEC+ output is expected to be particularly hard hit, with crude production now seen shrinking by 1.8 million b/d in 2026 after a sharp quarterly drop in Q2.
OIES projected a recovery of 1.9 million b/d for 2027. Non-OPEC+ supply growth remains limited, with gains of 440,000 b/d this year and 680,000 b/d in 2027.
Demand prospects have also weakened, the institute said. Global oil demand growth for 2026 has been revised down to 750,000 b/d, reflecting a sharper-than-expected slowdown in consumption, particularly across non-OECD Asia, where product shortages and policy responses are weighing on use.
OIES said demand is expected to contract over the year in Q2, before stabilizing later in 2026. Growth in OECD economies is also set to decline, with total demand in those countries projected to fall by 100,000 b/d this year.
The imbalance between supply and demand is set to widen the market deficit. The institute now estimates a 2026 shortfall of 2.1 million b/d, up from its previous projection of 1.9 million b/d.
Quarterly deficits are expected to peak at 4.6 million b/d in Q2 before easing as supply disruptions gradually unwind. OIES said a full release of strategic reserves from OECD countries could reduce the deficit by as much as 750,000 b/d.
However, despite tighter fundamentals, price forecasts were only marginally adjusted. Benchmark Brent crude is now expected to average $91 per barrel in 2026, down from prior estimates, before easing to $81/bbl in 2027.
Prices are projected to spike to $102/bbl in Q2, then decline to $86/bbl by year-end and dip into the mid-$70s in early 2027 as supply recovers.