Analysis by Energy Workforce President Tim Tarpley
Oil prices briefly touched 90 dollars earlier this week as prospects for a quick deal with Iran to wind down the conflict appeared less likely. Iran released a series of untenable conditions for the United States, including lifting all sanctions and having the military leave the Middle East. In turn, President Trump said Iran must pay compensation for “all the people that they have killed and gravely wounded.” Markets were down last week as Iran said it was nearing a final pact with Oman to define new shipping lanes through the strait, but Iran has now said that US conditions must first be met before the terms of the agreement can be implemented and the waterway officially reopened. These developments come after the Iran-backed Houthis struck Saudi Aramco’s Jazan refinery on Sunday. The refinery is currently not planning on being operational again until August 30th after suffering two attacks this month.
Analysts are beginning to redo their outlook for the worldwide energy markets due to these increasing attacks. EIA released its new analysis on Tuesday of this week and increased its estimate of Middle East shut-in crude in the coming months compared to its July forecast. While they expect most crude oil production in the region to return to near pre-conflict averages in early 2027, they expect ongoing disruptions of about .6 million barrels per day to continue through 2026. Additionally, the EIA now expects Brent crude oil spot price to average around $85 per barrel in the third quarter of 2026, with inventory recovery in 2027 gradually leading to a price closer to $70 per barrel.
What does this all mean for the energy markets going forward? The first thing for EWTC members is that the Middle East is unlikely to fully return to normal anytime soon; early 2027 is probably the best bet. Ultimately, it will depend on whether there is additional escalation; however, signs indicate that the entire conflict may end in something of a stalemate. Both sides are sending mixed signals while speaking tough in public statements but behind the scenes not taking steps that could escalate things further. While the current Iranian demands are not tenable for the US, it is possible that some status quo is reached where we return to a pre-conflict situation. This scenario would allow for oil prices to stabilize, but unfortunately the Iranians may be able to continue to use their control of the strait to extract concessions. We will likely see continued moves by Gulf countries to open new transportation options for crude that can bypass the strait altogether. Also, in this scenario, stable producers like the US and South America will likely continue to receive significant investment and production increases as we have seen in the past year.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
