Global energy markets are unlikely to return to pre-war conditions in 2027 as the conflict involving Iran continues to disrupt supplies, elevate oil prices and tighten refined-product markets, International Energy Agency (IEA) Executive Director Fatih Birol has warned.
Speaking at Singapore International Energy Week, Mr Birol said there was no credible path to a return to pre-war market conditions next year, urging governments and businesses to make energy security their top priority.
The conflict, which began in late February, has tightened global oil supplies, reversing expectations of a market surplus in 2026 and adding pressure to crude oil and refined-product prices.
Brent crude futures reached $117 per barrel on October 23, their highest level in nearly six months, before retreating on Monday. Prices remained approximately 59 per cent above pre-war levels, according to the report.
Mr Birol warned that oil prices approaching $120 per barrel could significantly widen trade deficits, particularly in countries with limited capacity to absorb higher energy import costs.
Diesel shortages raise winter concerns
Beyond crude oil, the IEA has raised concerns about the availability of refined products, particularly diesel and gasoil, as the Northern Hemisphere enters winter.
Several refineries are undergoing seasonal maintenance, potentially constraining production just as demand for heating fuels increases.
The agency’s October 2026 Oil Market Report warned that gasoil supply could fall short of demand in the fourth quarter of 2026. Reduced exports from the Middle East and Russia have also depleted inventories, with significant replenishment unlikely before the second half of 2027.
European gas markets face additional pressure as countries reduce Russian gas imports while Qatar and the United Arab Emirates remain unable to export gas at previous levels because of the conflict.
Nuclear power gains renewed momentum
The prolonged disruption to conventional fuel supplies is also strengthening interest in nuclear power as countries seek to diversify energy sources and improve the resilience of their electricity systems.
Mr Birol said the IEA’s latest survey indicated that nuclear power plants with a combined capacity of 90 gigawatts were under construction worldwide, the highest level in four decades.
The agency’s Global Energy Review 2026 had reported 78 GW of nuclear capacity under construction across 15 countries as of March, highlighting growing investment in the technology.
The differing figures reflect the need to distinguish between the report’s March assessment and the more recent survey cited by Mr Birol.
The developments underscore the vulnerability of global energy markets to geopolitical disruptions and the challenge facing governments as they balance fuel affordability, supply security and long-term investment in alternative energy sources.
For energy-importing economies, prolonged high prices could increase import bills and pressure foreign-exchange reserves, while tighter refined-product supplies could raise costs across transport, industry and electricity generation. The extent of these impacts will depend on the duration of the conflict, the recovery of disrupted exports and the availability of alternative supplies.