The International Energy Agency warns that renewed US-Iran hostilities could derail projections for a global oil surplus in 2027. While crude supply rebounded in June to 98.8 million barrels per day, market stability remains at risk due to conflict-related disruptions at the Strait of Hormuz. Tight refined product markets continue to push refinery margins to four-year highs, impacting global energy costs.
The International Energy Agency (IEA) has flagged significant uncertainty for the global energy outlook, warning that escalating hostilities between the United States and Iran threaten to undermine expectations for a substantial oil surplus by 2027. This concern comes despite a notable recovery in supply during June, which saw global oil output reach 98.8 million barrels per day (bpd) following a temporary ceasefire that reopened the Strait of Hormuz.
Impact on Supply and Pricing
While the June increase of 4.1 million bpd provided some market relief, the IEA emphasized that global production remains roughly 9.4 million bpd below pre-war levels. Gulf oil exports have partially recovered, reaching 16.1 million bpd in June, but this remains well under the pre-war average of 24 million bpd. These supply constraints have kept oil prices volatile. After dropping to around $68 per barrel in June, North Sea Dated crude prices reversed course sharply, climbing to approximately $77 per barrel following the resumption of clashes in July 2026.
Refinery Margins and Product Shortages
Beyond crude oil, the market is facing a notable tightness in refined products such as gasoline and diesel. Export refineries in the Gulf region have yet to reach full operational capacity, with refined product exports sitting at less than half of pre-war levels. This shortage is further exacerbated by ongoing damage to Russian refinery and export infrastructure caused by intensified attacks. As a result, refinery margins have spiked to four-year highs, creating a disparity between the availability of crude oil and the supply of finished fuel products.
Future Outlook and Demand Trends
Looking ahead, the IEA has slightly improved its 2026 forecast, now expecting a 3.7 million bpd decline in global supply compared to the previously estimated 3.9 million bpd drop. For 2027, the agency anticipates a supply growth of 7.5 million bpd, but this projection is heavily dependent on a de-escalation of the current geopolitical conflict and stable transit volumes through the Strait of Hormuz.
Global oil demand, which hit a low of 97.9 million bpd in May, is beginning a seasonal recovery. The IEA expects demand to surpass 2025 levels by October 2026. However, the full-year 2026 demand is still projected to decline by 1 million bpd before a potential rebound of 2 million bpd in 2027. Investors tracking energy companies and oil-dependent sectors should monitor transit volumes through the Strait of Hormuz, refinery operational status in the Gulf, and ongoing developments in global refining margins as key indicators of market stability.