Oil markets are pricing in prolonged supply disruptions well into 2027, with Brent crude futures remaining above $100 per barrel for January delivery as the U.S.-Israeli war with Iran continues to threaten energy flows and raise the cost of transporting petroleum products.
Prices for later delivery months are also elevated, signalling that traders and oil consumers are preparing for tighter supply conditions beyond the immediate conflict. ICE Brent futures for January 2027 stood at $102.59 per barrel, while the June 2027 contract traded at $92.71 and December 2027 delivery at $84.75.
The forward prices contrast with December 2025, when Brent crude traded below $70 per barrel. Earlier in the conflict, many market participants expected prices to retreat quickly once hostilities eased, but the brief ceasefire in June failed to deliver a lasting improvement in the outlook.
The prolonged war has instead reinforced concerns that disruptions to crude production, shipping and refining could persist into next year, prompting consumers to hedge future requirements at higher prices.
Reports that crude flows through the Persian Gulf have recovered to, or even exceeded, pre-war levels have provided only temporary relief to the market. Questions about the reliability of reported volumes, alongside the high cost of moving oil, have kept the risk premium in prices.
Ship-to-ship transfers have helped maintain some crude movements but have also tied up tankers for longer periods, reducing vessel availability and pushing freight costs higher. Gulf producers have consequently faced pressure to offer discounts to maintain demand for their crude.
Meanwhile, Iranian attacks on tankers transiting the Strait of Hormuz have continued, sustaining uncertainty over one of the world's most important energy shipping routes.
The pressure is more severe in refined petroleum products, particularly diesel, as damage to Middle Eastern refineries has restricted fuel supply even where crude movements have improved.
The International Energy Agency said it would begin releasing more than 20 million barrels of diesel from collective inventories to ease shortages that have pushed prices to record levels. The total release could reach 50 million barrels, equivalent to half of the overall inventory release agreed by IEA members earlier in October amid pressure from U.S. President Donald Trump.
However, emergency stock releases can only provide temporary relief. Once the inventories are depleted, replenishing them could prove difficult because global refining capacity is constrained and several facilities in the Middle East have been damaged by attacks.
The supply outlook also raises questions about assumptions that energy production and distribution will quickly return to normal after the conflict. In its latest monthly oil report, the IEA projected global oil supply would recover to 108.3 million barrels per day, from less than 101 million barrels per day this year.
The projected increase of more than seven million barrels per day would require a substantial recovery in supply. The figures indicate that current disruptions have left a significant gap to be addressed before the market can return to a more comfortable balance.
The disruption is also affecting liquefied natural gas flows, adding to pressure across international energy markets.
Higher oil and fuel prices are expected to sustain inflationary pressures, complicating economic policy for governments and central banks. Public authorities may be able to provide temporary relief through fuel-price support and other measures, but the cost of such interventions could become harder to sustain if energy prices remain high while economic growth weakens.
The International Monetary Fund projected global economic growth of 3.4 per cent next year, citing the resilience of the world economy. However, its chief economist, Silvana Tenreyro, warned that this resilience was approaching its limits and called for stronger fiscal capacity and more resilient supply chains.
“The global economy has been resilient, but that resilience is reaching its limits, so we need to move from just coping to rebuilding. We need to restore fiscal space. We need to rebuild supply-side resilience,” Tenreyro said.
Rebuilding energy supply chains will depend partly on the resolution of the conflicts disrupting production and trade. In addition to the war involving Iran, hostilities between Russia and Ukraine continue to cloud the outlook for global energy markets.
In the meantime, refined fuel prices remain elevated. ICE low-sulphur gasoil futures for November were trading above $1,404 per tonne, while the December 2027 contract stood at $1,001 per tonne.
The futures market suggests that the pressure is not expected to disappear immediately. With tanker availability constrained, refinery capacity damaged and geopolitical risks unresolved, oil and fuel consumers face the prospect of higher energy costs extending well beyond the coming weeks.