Energy Price Volatility: What's Driving the Swings in 2026

A Year Defined by a Single Chokepoint

Global energy prices in 2026 have been dominated by one geographic flashpoint: the Strait of Hormuz. The U.S. Energy Information Administration's July 2026 Short-Term Energy Outlook confirms the strait, through which roughly a fifth of the world's oil normally moves, was effectively closed from February 28 following the outbreak of the U.S.-Israel-Iran conflict, triggering what the International Energy Agency's April 2026 Oil Market Report called the largest single disruption to global oil supply in history. The IEA recorded global oil supply plunging 10.1 million barrels per day to just 97 million b/d in March 2026 alone, with OPEC+ output falling 9.4 million b/d month-on-month to 42.4 million b/d.

The Price Swings by the Numbers

The Spike

The scale of the resulting price move was extreme even by energy-market standards. Reporting from Investing News Network shows West Texas Intermediate hit a 46-month peak of USD 112.84 a barrel on April 7, a 97.8% surge from the USD 57.04 level at which WTI started 2026, while Brent climbed to USD 114.47 in the same quarter; separate reporting citing Yahoo Finance put Brent's intraday peak nearer USD 120 a barrel, prompting the IEA to convene an emergency meeting on strategic reserve releases. At the retail level, the effect reached households directly: coverage of the crisis found the U.S. national average gasoline price rose to USD 4.39 a gallon, a 39-cent jump in nine days and a 47% increase since the war began.

The Unwind

The reversal has been just as sharp. The EIA's July 2026 outlook shows Brent's spot price averaging USD 85 a barrel in June, down USD 22 from May and USD 32 from the April peak, and forecasts a further slide to an average of USD 74 in the third quarter of 2026. Reporting on the retreat notes Brent fell more than 10% in a single week in late June, its steepest weekly decline in months, as tanker traffic resumed through the strait and Saudi Arabia restarted loadings at its Ras Tanura terminal. The EIA projects the pump-level effect will follow: U.S. retail gasoline averaging under USD 3.80 a gallon in the third quarter, down from more than USD 4.20 in the second.

What's Driving the Supply-Side Volatility

Beyond the war itself, three supply-side forces are shaping how prices move. First, the U.S. Treasury's Office of Foreign Assets Control published General License X on June 22, a 60-day authorization permitting worldwide purchases of Iranian crude and petroleum products with no volume cap, a policy shift that immediately began unwinding the war premium priced into futures markets. Second, OPEC+ and the IEA hold sharply divergent views on the underlying balance: the IEA's January 2026 Oil Market Report forecasts global supply growth of 2.5 million b/d against demand growth of only 930,000 b/d, implying a substantial surplus, while OPEC's own research unit has forecast 2026 demand growth of 1.38 million b/d, roughly 50% higher than the IEA's estimate for the same year. Third, inventories have become the market's shock absorber: the IEA's June 2026 report recorded global observed oil stocks falling by an average of 3.8 million b/d since the war began, including a 143 million barrel draw in May alone, a pace the agency says could push stocks to historic lows before the market returns to surplus later in the year.

How Energy Companies Are Absorbing the Swings

Corporate disclosures show how directly these swings hit company earnings. ExxonMobil told investors it expected a roughly USD 3.7 billion profit increase in the second quarter of 2026 from the crude price surge alone, plus about USD 3.3 billion in combined refining and chemical margin gains, partially offset by roughly USD 1.2 billion in losses tied to Middle East production disruptions; the company separately disclosed that a full-quarter closure of the strait would cut its Middle East production by 750,000 barrels per day. Chevron CEO Mike Wirth warned publicly that pressure on prices was building through June and July as inventories thinned. Yet first-quarter 2026 results told a more complicated story: CNBC reported ExxonMobil's net income fell 45% year-on-year and Chevron's fell 36% in that quarter, even as oil prices spiked, because the surge came too late in the quarter to offset weaker pricing earlier in the year, a reminder that volatility can cut against producers as easily as it favors them.

Key Drivers Behind 2026's Volatility

• A near-total blockage of the Strait of Hormuz from late February, cutting global oil supply by over 10 million barrels per day at its worst point in March.
• A policy reversal via U.S. Treasury General License X in June, which reopened a path for Iranian crude exports and rapidly deflated the war premium.
• Diverging institutional forecasts, with the IEA and OPEC's research arm disagreeing by roughly 50% on 2026 demand growth, leaving traders without a consensus anchor.
• Record-pace inventory drawdowns that removed the market's usual buffer against further shocks, amplifying the price impact of each new development.