IEA cuts 2026 oil demand forecast again as Hormuz remains shut

Oil prices surged on Wednesday, nearing a two-week peak as tensions between the U.S. and Iran over the Strait of Hormuz persisted. Fresh strikes by Yemen's Iran-backed Houthis in the Red Sea further heightened fears of prolonged oil supply disruptions in the West Asia region. Brent oil futures climbed 0.6% to $89.45 a barrel, while West Texas Intermediate crude futures rose 0.7% to $83.77 a barrel.

Hormuz trade remained sluggish as the U.S. and Iran showed little progress towards a deal, particularly after Washington announced a strike on a ship in the Gulf of Oman believed to be bound for Iran. Tehran had earlier suggested that Hormuz would remain closed unless Washington accepted its demand for reparations, a stance President Donald Trump vehemently opposed.

Hormuz posed a significant uncertainty for oil markets, as the channel had once supplied around 20% of the world's oil before the start of the war. The attacks by the Houthis on ships in the Red Sea and the Bab el-Mandeb strait added to concerns over supply disruptions, suggesting that the conflict in West Asia remained unresolved and traders remained wary of more oil supply disruptions, thereby supporting crude prices.

The U.S. Strategic Petroleum Reserve (SPR) dipped to its lowest level in 43 years, falling below 300 million barrels last week, according to data from the Department of Energy. The reserve, established by the U.S. government for oil supply emergencies, was gradually depleted this year due to disruptions from the Iran conflict. President Trump had earlier authorized the release of 172 million barrels in March in response to the Iran conflict.