The International Energy Agency has issued a stark warning about the global energy landscape, forecasting that worldwide oil demand will plummet this year as the escalating conflict between the United States, Israel, and Iran creates unprecedented market disruptions. In a dramatic reversal from previous projections, the Paris-based agency now predicts demand will fall by 80,000 barrels per day in 2026, compared to its earlier forecast of a 640,000 barrel per day increase.
This sharp revision comes amid what the IEA describes as “the largest oil supply disruption in history,” with 10.1 million barrels per day lost in March alone. The crisis centers on the Strait of Hormuz, where Iran has brought traffic to a near-total halt in response to US-Israel attacks on its territory since late February. This strategic chokepoint, through which approximately 20% of global oil shipments pass, has become the focal point of the escalating conflict.
The economic consequences have been immediate and severe. “Demand destruction will spread as scarcity and higher prices persist,” the IEA report states, noting that the deepest cuts in oil consumption have occurred in the Middle East and Asia Pacific regions. The agency projects a 1.5 million barrel per day drop in demand during the second quarter of this year, marking the deepest contraction since the COVID-19 pandemic.
Compounding the crisis, US President Donald Trump announced a blockade on Iranian ports on Sunday after peace talks in Islamabad failed to produce an agreement. This move has “further clouded the outlook for global energy security,” according to the IEA, which warned that oil demand could plunge even further if the strait remains closed. The agency emphasized that “resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy.”
Meanwhile, the disruption has created unexpected beneficiaries. Russia has seen its revenues from crude oil and refined products rise in March, rebounding from February lows, thanks to the surge in global prices caused by the supply constraints. This development adds another layer of complexity to an already volatile geopolitical situation.
IEA chief Fatih Birol has appealed to nations to avoid hoarding energy supplies and imposing export controls that could worsen the shock. “Several countries were holding onto stocks and imposing export restrictions,” Birol told reporters, urging all nations to allow energy stocks to flow freely to markets.
The Organization of the Petroleum Exporting Countries has also adjusted its outlook, lowering predictions for world oil demand in the second quarter while maintaining its full-year forecast. As the situation continues to evolve, energy markets and economies worldwide must brace for significant disruptions in the coming months, with the Strait of Hormuz remaining the critical flashpoint in this unfolding global energy crisis.
Source: Al Jazeera