IEA deepens 2026 oil supply forecast as Iran war disrupts flows

The International Energy Agency (IEA) has significantly reduced its 2026 global oil supply forecast to its lowest level of the year, due to ongoing disruptions in the Strait of Hormuz and the Bab Al Mandeb strait. This comes as Iran's conflict continues to wreak havoc on global oil flows. The Paris-based agency now anticipates a 4.3 million barrel-per-day (bpd) decline, marking a 600,000 bpd increase from their forecast a month prior.

In their latest monthly report, the IEA predicts global supply to average 102 million bpd this year, directly linking the outlook to resolving the conflict and reopening vital shipping lanes. However, the prolonged crisis has exposed vulnerabilities in oil-importing countries' energy security. Despite Gulf producers managing to increase output in July, their ability to get barrels to market has deteriorated sharply.

While regional production rose by 2.5 million bpd to 23.9 million bpd, it remains 8.3 million bpd below pre-conflict levels. The key waterways of Hormuz and the Bab Al Mandeb strait have been effectively closed, with flows through the latter collapsing in July as ships came under attack. The UAE's production, including crude, took a significant hit, falling by 190,000 bpd to 4.7 million bpd in July due to shipping disruptions and attacks on offshore facilities.

Similarly, Qatar faces an estimated loss of 910,000 bpd in 2026, making it the largest annual supply loss among producers outside the conflict zone. Kazakhstan also suffered the sharpest decline, with its production dropping by 330,000 bpd in July, primarily due to attacks on Black Sea ports and tankers.