Geopolitical disruptions have tightened global energy markets, pushing prices higher in the near term, with normalization expected only if supply flows recover.
The Middle East conflict could have a long-term impact, and even after the oil flow resumes through the Strait of Hormuz, it will take time to resolve the backlog and disruption to oil tanker routes and trade flow, the Energy Information Administration stated in its Short-term Energy Outlook released Tuesday.
The West Texas Intermediate (WTI) crude oil futures surged more than 3% at one point during Tuesday’s trading as U.S. President Donald Trump escalated threats to target Iran’s energy infrastructure if no deal is reached by his Tuesday night deadline.
Shut-Ins to Rise Before Falling: Production shutdowns by Iraq, Saudi Arabia, Kuwait, UAE, Qatar and Bahrain collectively reduced crude oil production by 7.5 million barrels per day (mb/d) in March, and this is expected to increase to 9.1 mb/d IN April, EIA said. Assuming the conflict does not persist past April, EIA expects production shut-ins to fall to 6.7 mb/d in May before returning to pre-conflict levels in late 2026.
Prices to Gradually Drop: After Brent crude oil spot prices averaged at $103/barrel in March, the EIA expects the prices to peak at $115/barrel in the second quarter before easing. It expects the prices to drop to $90/barrel in the fourth quarter and fall further in 2027 (estimated average price of $76). The forecast is based on the agency’s assumptions regarding the duration of conflict in the Middle East and the resultant outages in oil production.
The EIA clarified that it maintained a risk premium on crude prices due to expectations that uncertainty around futures supply disruptions will keep prices above pre-conflict levels.
Diesel, Retail Gasoline Prices: The EIA expects diesel prices to peak at more than $5.80/gallon in April, averaging $4.80/gallon in 2026. Retail gasoline prices are expected to peak at a monthly average of $4.30/gallon in April but average around $3.70/gallon this year.
LNG Constraints: U.S. liquified natural gas (LNG) export facilities ran at near-peak capacity, exporting nearly 18 billion cubic feet (bcf/d) in March, the EIA stated. This was nearly equal to the record levels exported in December 2025.
EIA clarified that there was only very limited flexibility to increase exports, with any additional capacity to come from the flexibility expected from deferred maintenance, the pace of new product ramp-ups and recent export authorization agreements.
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