New Delhi [India], April 16 : The ongoing Iran conflict has sharply reversed the global oil market balance, wiping out last year's surplus and pushing the market into a deficit in early 2026, according to a report by YES Securities.
The report noted that the oil market has "shifted decisively from a position of sizable surplus in 2025 to a materially higher deficit so far in 2026", primarily due to supply disruptions triggered by the conflict. Significant production shut-ins across key oil-producing regions have eroded the buffer that previously kept prices stable.
Before the conflict, global oil markets were comfortably oversupplied, with surplus averaging 2.3 million barrels per day (mbpd) in 2025. However, disruptions intensified in recent months, with production outages estimated at up to 10 mbpd in April 2026, transforming the balance into an average shortfall of 1.4 mbpd during the first four months of the year.
Despite the sharp tightening, the report suggests the deficit may not persist through the year. "We think that the supply loss during March and April will not likely translate into a sustained deficit throughout the year," it said, adding that the conflict is expected to ease soon.
It says "we expect the conflict to end by this month. Therefore, markets are unlikely to remain in a sustained deficit as disruptions ease through the year."
Oil prices, meanwhile, are projected to remain elevated in the near term, stabilising around USD 80-85 per barrel, supported by a geopolitical risk premium of USD 10-15 per barrel. Higher prices are likely to incentivise increased production from non-OPEC players, particularly US shale, helping bridge the supply gap.
The report noted "Even if the conflict ends by April, benchmark prices are likely to stabilize in the USD 80-85/bbl range rather than retrace sharply, as partial normalization in transit flows is expected but not a full return to pre-conflict conditions until late 2026. As a result, Oil prices are expected to embed a geopolitical risk premium of roughly USD 10-15/bbl"
At the same time, elevated prices are expected to dampen demand growth in the near term, especially across price-sensitive markets, keeping the overall oil market broadly balanced toward the end of 2026.