EIA Forecasts $115 Brent Peak as Hormuz Cuts 6.7 mb/d in May

Gulf producers will deliver roughly 6.7 million barrels per day in May 2026, down sharply from 9.1 mb/d in April, according to the U.S. Energy Information Administration’s May Short-Term Energy Outlook released Friday. The agency projects Brent crude to average $96 per barrel for the full year, with a Q2 peak near $115 as the market absorbs what the International Energy Agency is calling the largest supply disruption in recorded history.

Brent was trading at $108.20 and WTI at $101.90 as of Friday afternoon, reflecting a partial rebound after earlier peace-signal-driven softness. Gold held at $4,600 per troy ounce and the 10-year Treasury yield sat at 4.39 percent.

EIA: Partial Resumption Priced In, But Risks Tilt Higher

The EIA’s baseline scenario assumes some tanker traffic through the Strait of Hormuz resumes by mid-year, which accounts for the moderation in its May supply estimate relative to April. Even so, the agency’s full-year Brent forecast of $96 per barrel and its Q2 peak estimate of $115 are among the highest projections the agency has published in its monthly outlook series.

U.S. retail gasoline is projected to average $3.70 per gallon for 2026. That figure masks a sharper squeeze already visible at the pump — the EIA’s data shows April averages approached $4.30 per gallon nationally, reflecting the tightest supply conditions of the current disruption. The agency expects prices to ease gradually through the second half of the year as Atlantic Basin and U.S. production partially offsets Gulf losses.

Domestic crude output is projected to hold near record highs, though pipeline and refinery infrastructure constraints in the Permian Basin limit the speed at which additional barrels can reach export terminals or East Coast refineries optimized for heavier Gulf grades.

IEA: “Largest Supply Disruption in Recorded History”

The International Energy Agency’s April 2026 Oil Market Report, published concurrently with the EIA data, provides the most complete accounting yet of the disruption’s scale. Global oil output fell to approximately 97 million barrels per day in March — a reduction of 10.1 mb/d from February levels. The IEA described that decline as the largest single-month supply shock in the agency’s five-decade data history, surpassing the combined impact of the 1973 Arab embargo and the 1979 Iranian revolution.

LNG losses compound the crude picture. Qatari and UAE liquefied natural gas exports — together representing a substantial share of global LNG supply — have declined by more than 2 billion cubic metres per week. European buyers, still rebuilding storage after the 2022–2024 Russia disruption cycle, face the prospect of back-to-back shortfalls heading into winter.

The IEA’s baseline forecast assumes a mid-year diplomatic resolution allows partial export resumption. However, the agency’s own report includes an explicit caveat: the assumption “may be too optimistic” given the current state of negotiations. No formal framework is in place. U.S.-Iran diplomatic contacts remain indirect and preliminary, and Iranian officials have publicly conditioned any resumption on security guarantees the United States has not offered.

Sanctions Enforcement Adds a Secondary Constraint

Energy market tightness is not solely a function of physical blockade. U.S. sanctions enforcement has added a secondary layer of supply reduction that would persist even if the Strait reopened tomorrow.

The Office of Foreign Assets Control issued formal guidance this week warning that any entity collecting fees on Hormuz transits — a practice that has emerged as Iranian-aligned actors attempt to monetize chokepoint control — faces exposure to secondary sanctions. The full scope of that guidance is detailed in a separate report on the OFAC Hormuz toll warning.

On the demand side of sanctions enforcement, the Treasury Department moved Friday against a Chinese terminal operator accused of receiving Iranian crude in violation of existing restrictions. That action, covered in detail in our report on the Qingdao Haiye sanctions, signals continued U.S. willingness to pursue Chinese buyers even as diplomatic channels remain open.

Iran’s Calculus and the Duration Question

The duration of the disruption remains the central variable for energy forecasters. Iranian President Pezeshkian has publicly framed the blockade as economically sustainable for Tehran in the medium term, pointing to elevated oil revenues from the reduced volumes Iran does move and to domestic political constraints that make a rapid concession difficult. That position, and its implications for the blockade’s timeline, is examined in our analysis of Iran’s endurance calculus.

The IEA’s scenario analysis is instructive here. In a prolonged disruption case — defined as no meaningful resumption before Q4 2026 — the agency models Brent averaging above $110 for the full year and European gas storage entering the 2026–2027 winter at critically low levels. That scenario would trigger emergency IEA stock releases, demand-side interventions in Europe, and accelerated U.S. SPR decisions.

Market Positioning

With Brent at $108 and the EIA projecting a $115 peak, the market is not fully pricing the IEA’s downside scenario. That gap reflects genuine uncertainty about the disruption’s duration — traders are assigning meaningful probability to a diplomatic offramp in Q2 — but it also leaves room for a sharp repricing if negotiations stall through June.

Gold’s move to $4,600 per ounce suggests that at least some market participants are hedging for a longer and more financially disruptive scenario than the energy agencies’ baselines assume. Treasury yields at 4.39 percent reflect a Federal Reserve that remains constrained: oil-driven inflation limits the room to cut even as growth risks mount.

The EIA updates its Short-Term Energy Outlook monthly. The next release is scheduled for early June.