Global oil markets

Global oil prices
The Brent crude oil spot price rose from an average of $71 per barrel (b) on February 27 to $94/b on March 9 following the onset of military action in the Middle East that began on February 28. As of March 9, when we finalized our forecast, physical damage to oil infrastructure was limited, but the Strait of Hormuz was effectively closed to most shipping traffic. High uncertainty about the conflict’s effect on oil supplies has added a large risk premium to oil prices as market participants assess actual disruptions to oil flows and weigh the potential for those disruptions to persist.

The primary risk that would cause oil prices to continue rising is an extended closure of the Strait of Hormuz, which is a major world oil transit chokepoint through which nearly 20% of global oil supply flows. Although the Strait of Hormuz is not physically blocked, the threat of attack by Iran and the cancellation of insurance coverage have led most tankers to avoid transiting the Strait. As a result, some oil production in the region has been shut in. If this reduction in vessel volume persists, oil storage behind the chokepoint will quickly fill, causing oil producers to shut in even more production, lending further support to oil prices.

Running our model requires making a number of assumptions about an environment that is evolving and uncertain. In this analysis, we make the assumption that shut-in oil production will peak in early April, mostly in Iraq with smaller volumes in Kuwait, the United Arab Emirates, and Saudi Arabia. We make the further assumption that shut-in production will gradually ease as transit through the Strait resumes. We expect some near-term disruptions of oil flows and related production shut-ins, along with a persistent risk premium, will keep Brent prices at an average of $91/b in the second quarter of 2026 (2Q26). Once oil flows are reestablished through the Strait of Hormuz, we expect global oil production will continue to outpace consumption over our forecast period, resulting in global oil inventories increasing by an average of 1.9 million barrels per day (b/d) in 2026 and by 3.0 million b/d in 2027. Growing oil inventories will again begin to weigh on oil prices, and we expect the Brent price will fall to an average of $70/b in 4Q26 and $64/b in 2027.

On March 1, OPEC+ agreed to begin increasing production in April 2026 by a total of 206,000 b/d in response to estimated low oil inventories, with the next decision to come on April 5. Although OPEC+ will not announce its planned 2027 targets until 4Q26, we do not expect OPEC+ will significantly increase production next year given estimates of significant inventory builds over the forecast period. Our current assumption around OPEC+ supply also is contingent on the duration and extent of disruption to oil flows around the Strait of Hormuz.