The International Energy Agency has sharply lowered its global oil demand forecast for 2026 as the Gulf supply crisis continues to disrupt energy markets.
However, the IEA expects oil flows through the Strait of Hormuz to recover gradually. Supply could reach around 8 million barrels per day in 2027 as shipping routes reopen and trade conditions improve.
IEA Cuts 2026 Oil Demand Forecast
The agency now expects global oil demand to fall by 1.1 million barrels per day in 2026.
This represents a significant downgrade from its previous forecast, which projected a decline of only 420,000 barrels per day.
According to the IEA, high oil prices and severe supply disruptions caused by the conflict have weakened demand across the global economy.
Oil Demand Could Rebound in 2027
The outlook is expected to improve next year.
The IEA forecasts global oil demand growth of 2 million barrels per day in 2027. Lower energy prices, recovering trade flows and stronger economic conditions could support the rebound.
However, the agency warned that restoring normal market conditions will take time.
US-Iran Agreement Offers Hope for Energy Markets
The United States and Iran have reached a preliminary agreement aimed at ending hostilities. A formal signing ceremony is expected on Friday.
In its latest monthly report, the IEA described the agreement as the most important diplomatic breakthrough since the conflict began.
Nevertheless, several parts of the agreement remain unclear. Important issues must still be resolved before Gulf oil supplies can return to normal levels.
Strait of Hormuz Recovery Will Take Time
The IEA warned that a full recovery in oil shipments will not happen immediately.
Mines must first be removed from major shipping lanes. In addition, damaged supply chains and transport networks will require time to recover.
These challenges could continue to limit oil exports from the Persian Gulf even after the conflict formally ends.
Brent Crude Falls Below $80
Oil prices declined sharply following signs of progress in the peace negotiations.
Brent crude dropped below $80 per barrel on Wednesday, while US West Texas Intermediate traded near $76 per barrel.
Brent has fallen by more than 8% this week. It is now trading at its lowest level since early March.
Global Oil Supply Faces Major Decline
The IEA expects worldwide oil supply to fall by 3.9 million barrels per day in 2026.
Around one-fifth of global oil supplies remain trapped within the Persian Gulf due to disruptions affecting shipping routes and export infrastructure.
However, supply is forecast to recover by approximately 8 million barrels per day in 2027 as conditions gradually normalise.
Gulf Oil Exports Remain Severely Disrupted
Global oil production in May was 13.6 million barrels per day below levels recorded before the war.
Exports from Gulf producers declined by 1.1 million barrels per day during the month. They were also almost 15 million barrels per day below February levels.
These figures highlight the scale of the disruption facing global energy markets.
Global Oil Inventories Fall Sharply
Observed global oil inventories declined by 143 million barrels in May.
Since the conflict began, inventories have fallen at an average rate of approximately 3.8 million barrels per day.
Government-controlled oil reserves across OECD countries dropped by 163 million barrels. According to the IEA, these inventories have now reached their lowest level since December 1990.
