Crude markets are settling into a prolonged period in which supply disruption is a standing condition rather than a series of discrete shocks, according to a new analysis from S&P Global Energy.

For the first time since the US-Iran war began, the firm no longer expects Middle Eastern crude production to recover to prewar levels by yearend 2027. The outlook assumes no definitive end to the conflict, no normalization of traffic through the Strait of Hormuz, and no removal of Red Sea disruption risk from Iran's Houthi allies over that period.

Middle Eastern crude and condensate exports are now forecast to average roughly 10-16 million b/d on a monthly basis through 2027, compared with about 20 million b/d in January-February 2026, immediately before the war.

Regional crude and condensate production is expected to average 21 million b/d over the same period, 4.2 million b/d below S&P Global's previous projection. Production capacity has not been permanently lost, but security and logistical constraints are limiting how much oil can reach the market, S&P Global said.

Gulf producers have strong incentives to find ways to move more oil to market and can be expected to adapt around political and security constraints where possible, said Jim Burkhard, vice-president and global head of crude oil research at S&P Global Energy.

The market, however, "is not returning to calm," Burkhard said. Instead, it is adjusting to conditions defined by unresolved conflict and persistent maritime risk, with oil flows remaining below prewar levels and an uneven path toward recovery.

Price outlook

S&P Global now expects crude oil prices broadly in an $80-100/bbl range through 2027. Dated Brent is expected to average around $90/bbl or higher for the balance of 2026 and $86/bbl in 2027, $5/bbl above the firm's previous forecast. Brent recently traded above $100/bbl for the first time since July.

The near-term outlook is broadly in line with the US Energy Information Administration (EIA)'s September Short-Term Energy Outlook, which also forecasts Brent at around $90/bbl in second-half 2026.

The two outlooks diverge more sharply in 2027. EIA expects Brent to average $74/bbl for the year and fall to about $67/bbl in second-half 2027, compared with S&P Global's $86/bbl annual forecast.

The $12/bbl difference largely reflects assumptions about the pace of recovery in Middle Eastern supply. EIA expects Middle East crude oil production will likely return to near pre-conflict averages by second-quarter 2027, while S&P Global does not expect regional crude production to return to prewar levels by yearend 2027.

The Russia-Ukraine war and the US-Iran conflict have reduced refinery output through direct damage to infrastructure and difficulties moving petroleum products to market. China also has reduced seaborne crude purchases and refinery runs. Together, those factors have lowered crude demand and tempered price gains.

S&P Global expects global crude demand to average 80.2 million b/d in fourth-quarter 2026, down 4.7 million b/d from a year earlier.

Crude demand is constrained not because consumers have disappeared but because refiners have limited ability to process additional barrels. Lower Middle Eastern production is supporting prices, while refining constraints and relatively low Chinese crude imports are limiting crude demand, leaving the market caught between constrained supply and limited available refining capacity, Burkhard said.