IEA cuts 2026 oil demand forecast again as Hormuz remains shut

The International Energy Agency (IEA) has significantly slashed its 2026 oil demand forecast due to the persistent closure of the Strait of Hormuz and soaring fuel prices, which are discouraging buyers. The agency now anticipates global oil supply to decline by an average of 4.3 million barrels per day (mb/d) this year, before rebounding in the following year.

This forecast reduction represents a sharp uptick from its previous estimate of a 1 million mb/d drop in July, reflecting the impact of the ongoing conflict in the Middle East.

Crude oil prices have remained substantially higher than they were prior to the US and Israeli attacks on Iran in late February, which triggered a war that has damaged oil infrastructure in several Gulf countries. In retaliation, Tehran effectively halted tanker and cargo traffic in the Strait of Hormuz, a critical route through which approximately one-fifth of global oil supplies typically pass.

Despite intermittent reports of a ceasefire and pledges to reopen the strait, only a small number of vessels have been granted passage, resulting in price volatility across global oil markets. The IEA noted that global supplies increased by 2.4 million barrels per day in July, reaching 101.5 mb/d, but this figure still fell 6.3 mb/d short of the previous year's levels.

However, renewed hostilities and disruptions to maritime traffic in July and early August have hindered the recovery efforts. Looking ahead to demand, the IEA projects an eventual resurgence in 2026, with growth expected to pick up in the fourth quarter of the year.