By Giulia Petroni
Global oil demand is set to contract this year as the near-closure of the Strait of Hormuz leaves nations scrambling to secure barrels from an increasingly tight pool of supply, the International Energy Agency said.
The Paris-based organization--a group of Western nations and their allies--now sees global demand shrinking by 80,000 barrels a day this year, from prior expectations of 640,000 barrels a day of growth. In the second quarter, demand is forecast to fall by 1.5 million barrels a day, the sharpest decline since the Covid-19 pandemic.
"The outlook for global oil market balances has rarely been as uncertain, " the IEA said in its closely watched monthly report on Tuesday. "Disruptions to oil supply and trade from the Middle East war continue, aggravating crude and product shortages and pushing prices to levels that are undermining demand."
The agency's forecast assumes oil and gas deliveries from the Middle East to international markets resume by midyear, though not to pre-conflict levels. If the Strait of Hormuz reopens and trade routes are secured, the IEA estimates it would take about two months to restore steady exports.
With 20% of the world's oil trapped behind Hormuz, the IEA expects global supply to decline by 1.5 million barrels a day this year, from previous expectations of 1.1 million barrels a day of growth. OPEC+ annual production is set to plunge by 2.4 million barrels a day, largely due to losses from Gulf producers.
In March, oil supply plummeted by 10.1 million barrels a day, as continued attacks against key energy infrastructure in the Middle East and restrictions to tanker movements through Hormuz led to what the IEA described as "the largest disruption in history."
Production from the OPEC+ alliance fell by 9.4 million barrels a day compared to the previous month. Gulf oil exports across all routes plunged by 15.8 million barrels a day, while crude and condensate exports through the Strait of Hormuz dropped by 14.2 million barrels a day.
The IEA expects supply to fall by a further 2.9 million barrels a day in April before starting to recover.
The near-closure of Hormuz--a vital route carrying about one-fifth of global oil flows--forced major producers in the region to cut output and divert shipments, severely disrupting exports and pushing futures prices near $120 a barrel. Exports through the strait are down by 90%, according to the agency's estimates.
The turmoil has also created a widening disconnect between futures and physical markets. Spot crude prices have soared near $150 a barrel, far outpacing futures, while refined products--particularly middle distillates--have hit record highs as buyers scramble to replace Middle Eastern cargoes.
After the breakdown of peace talks between the U.S. and Iran over the weekend, American military forces began blockading all traffic from and to Iranian ports, raising fears that Iran could escalate and disrupt other important shipping routes--particularly the Bab al-Mandeb Strait.
However, signs that Washington and Tehran see scope to continue negotiations lifted market hopes, sending oil back below $100 barrels. In early European trading on Tuesday, Brent crude was around $98 a barrel, while West Texas Intermediate hovered around $97 a barrel.
Meanwhile, leaders of the IEA, International Monetary Fund, and World Bank Group met Monday to discuss the impact of the conflict and coordinate possible support for some nations. Last month, members of the IEA agreed to release 400 million barrels of oil from emergency stocks--the largest reserves release in history--in an effort to bring down prices.
"Demand destruction will spread as scarcity and higher prices persist," the IEA said. "The Iran war has thoroughly upended the global outlook for oil consumption."
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
April 14, 2026 04:46 ET (08:46 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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