IEA deepens 2026 oil supply forecast as Iran war disrupts flows

The International Energy Agency (IEA) has significantly reduced its forecast for global oil supply in 2026, reaching its lowest point of the year. This forecast drop comes after the Strait of Hormuz remained shut and attacks occurred in the Bab Al Mandeb strait. The IEA now predicts a decrease of 4.3 million barrels per day (bpd), which is 600,000 bpd more than they forecasted a month ago.

According to their monthly report, the global supply is estimated to average 102 million bpd for the year. The agency attributes this outcome to the resolution of the conflict and the reopening of crucial shipping routes. However, they emphasize that the ongoing Iran-Iraq war has created the largest global oil supply disruption ever witnessed.

This conflict has exposed the vulnerabilities in energy security for oil-importing nations. Gulf producers managed to increase output in July, despite a sharp decline in their ability to transport barrels. Despite this, their production remains 8.3 million bpd below pre-conflict levels. Shipments through Hormuz and alternative pipeline routes fell by 2.1 million bpd, reaching 15 million bpd.

The Bab Al Mandeb strait, linking the Red Sea and the Gulf of Aden, also faced significant challenges, with flows collapsing in July due to intensified attacks on shipping and oil infrastructure. The UAE's crude production fell by 190,000 bpd in July, and Qatar is expected to lose about 910,000 bpd in 2026 due to regional risks.

Among individual producers, Kazakhstan experienced the most significant month-on-month decline, with its output dropping by 330,000 bpd due to renewed attacks on Black Sea ports and tankers.