Key facts
- Oil prices are expected to remain high into 2027 due to ongoing supply tightness from the war with Iran.
- Brent crude futures for January 2027 are trading at $102.59 per barrel, up from under $70 in December 2025.
- The IEA will release over 20 million barrels of diesel from reserves to address supply gaps.
- Refinery targets in the Middle East have exacerbated fuel supply challenges, particularly for diesel.
- Global economic growth forecasts remain upbeat, but resilience is reaching its limits, according to the IMF.
Oil prices are expected to remain elevated into 2027 as the war between the U.S. and Israel and Iran continues to tighten supply. Initial optimism that the conflict would end quickly has faded, with expectations now pointing to prolonged high prices. Brent crude futures for January 2027 are trading at $102.59 per barrel, a significant increase from less than $70 in December 2025. Despite reports of recovering oil flows from the Persian Gulf, a crisis of trust in official figures and costly logistical maneuvers like ship-to-ship transfers have kept the tanker market tight and freight costs high. Iran's ongoing attacks on tankers in the Strait of Hormuz further contribute to the war premium on oil. The situation is even more challenging for refined fuels, particularly diesel, as refineries in the Middle East have been targeted. The International Energy Agency plans to release over 20 million barrels of diesel from reserves to address the supply gap, with the total release potentially reaching 50 million barrels. However, inventory releases are temporary, and replenishing them will be difficult due to a global shortage of refining capacity. The agency still anticipates a rebound in global oil supply to 108.3 million barrels daily, but this projection is questioned given the ongoing hostilities. These factors are expected to continue driving inflationary pressures from energy commodities, impacting the global economy and potentially leading to economic stagnation or recession.