IEA Chief Sees No Return to Normal Energy Markets in 2027 as Brent Tops $111

Global energy markets are more than a year from normal, and the man who tracks them for the world's industrial economies is not pretending otherwise.

"I don't see any credible pathway that 2027 will be a year of normalisation," International Energy Agency Executive Director Fatih Birol told the Financial Times Energy Transition Summit in London. The Strait of Hormuz has been closed once, he said, and "it can be closed again."

Brent crude was trading above $111 a barrel when he spoke. If it held there, it could settle at its highest level since May.

How the squeeze built

The U.S.-Israeli war with Iran began Feb. 28. Commercial traffic through Hormuz, which carried about a fifth of the world's oil and natural gas before the war, fell to a trickle in March.

The IEA estimated an 8 million barrel-per-day cut in global supply that month. S&P Global put the March loss nearer 10 million barrels a day. Commercial inventories outside the Gulf were drawn down by more than 200 million barrels in the first months of the conflict, including 85 million in March alone, according to an analysis published by Financial Sense. Middle East exports, roughly 23 million barrels a day before the war, fell to between 10 and 16 million barrels a day in that account.

A ceasefire arrived in June. The same Financial Sense analysis says about 10 million barrels a day of Gulf exports stayed trapped afterward, because loading and shipping infrastructure could not be repaired by a political agreement.

On Sept. 14, American oil executives declared that "the great oil crisis is here." The Wall Street Journal reported that commercial fuel stocks worldwide had been depleting for more than six months and that strategic crude reserves could not be tapped much further. It also reported that attacks the prior week had shut a Saudi crude pipeline that bypassed the Strait, stranding at least 2.5 million barrels a day.

Flows recovered, prices did not settle

The picture is not uniformly grim. Kpler data showed the seven-day average of oil flows out of the Middle East, including via Hormuz, the Red Sea and the Gulf of Oman, at just over 24 million barrels a day. That is above the pre-war average. Tanker crossings of the Strait remain well below pre-war levels, but restored Saudi pipeline exports have helped keep a lid on prices.

Crude has also stayed below the $200 a barrel some analysts predicted at the start of the war.

Birol called it "myopic" to judge the crisis by crude alone. "We don't use crude oil, we use products," he said.

Diesel is where it hurts

Diesel prices have doubled from pre-war levels, Birol said, largely because of the Iran war and partly because of attacks on Russian refineries. He warned that the market is entering the season when diesel demand typically rises, just as many large refineries schedule maintenance.

The IEA said Oct. 14 that diesel refining margins, the gap between diesel prices and the crude used to make it, reached nearly $95 a barrel in September, up from $50 in early March. The agency said record diesel prices were raising the cost of goods, squeezing real incomes and feeding inflation.

Middle East and Russian diesel exports fell by a combined 1.3 million barrels a day in September, the IEA said. Moscow banned most diesel exports on July 8. Sergey Vakulenko, a senior fellow at Carnegie Russia Eurasia Center, said Russian shipments dropped from roughly 3 million tons a month in April to 325,000 tons by September after Ukrainian drone strikes and falling production. Russian refineries are running at 3.8 to 4 million barrels a day against a full capacity of 5.5 million.

In the United States, retail diesel reached $6.28 a gallon by Oct. 9, up about 70% since the war began. President Donald Trump has floated banning diesel exports to curb domestic prices. As of the latest reporting in mid-October, no ban had been imposed.

America is not walled off

The U.S. often produces more petroleum than it consumes, but that does not insulate it. A Georgia Tech report says American consumers remain exposed to disruptions in global supply because crude is priced and traded globally.

Austin Sarat, a jurisprudence and political science professor at Amherst College, argues in The Fulcrum that no administration can "pull up the drawbridges" and shield the country from what is coming. He contends the crisis shows the cost of short-term energy politics.

A diesel export ban would test that claim directly. Trump has floated it only as a way to cut domestic prices; it has not been enacted.

Governments are changing course

The crisis is also reshaping power markets. The IEA's Renewables 2026 report forecasts global renewable capacity growing by almost 4,800 gigawatts from 2026 to 2031, nearly 60% more than in the prior six-year span. Solar would account for more than three-quarters of that.

Birol said the driver has shifted. Environmental concerns used to lead, he said, but "today, it's mainly energy security" as countries try to cut exposure to imported fuels. China's share of the growth is forecast to fall from over 60% in 2025 to an average of 53%, while India is set to become the second-largest growth market.

The IEA also says households and small businesses facing high fuel prices and unreliable grids are turning to cheap solar on their own. Rooftop solar has improved electricity access for at least 70 million households since 2022.

What comes next

Iran has issued public threats against Washington in what CNN describes as an apparent bid to deter Trump from reigniting the stalemated conflict. Houthi attacks on Saudi Arabia forced the kingdom to call off its flagship investor conference planned for later this month.

The IEA expects diesel supply constraints to run into 2027, with inventories unlikely to return to comfortable levels until the second half of the year. That timeline assumes Hormuz stays open.