The International Energy Agency (IEA) has warned that the ongoing disruption in the Strait of Hormuz is triggering one of the largest oil market shocks in modern history. The agency forecasts global oil demand will decline by 420,000 barrels per day year-over-year in 2026 to 104 million barrels per day, marking one of the few annual contractions outside major global crises.
In its Oil Market Report released Tuesday, the IEA said the biggest hit is expected during the second quarter of 2026, when global demand is projected to plunge by 2.45 million barrels per day compared to last year, led by steep declines in petrochemicals and aviation. Meanwhile, the conflict surrounding Iran and the Strait of Hormuz continues to choke off exports from the Gulf.
According to the report, global oil supply fell another 1.8 million barrels per day in April to 95.1 million barrels per day, bringing total losses since February to 12.8 million barrels per day. Output from Gulf producers affected by the Strait disruption was running 14.4 million barrels per day below pre-war levels. The IEA said cumulative supply losses from Gulf producers now exceed 1 billion barrels, calling the situation an "unprecedented supply shock."
Saudi Arabia and the UAE have rerouted some exports to terminals outside the Strait, while Atlantic Basin producers including the United States, Brazil, Canada, Kazakhstan and Venezuela have sharply increased exports to Asia and other affected markets. Global observed oil inventories fell by 129 million barrels in March and another 117 million barrels in April, while OECD on-land stocks alone dropped by 146 million barrels in April.
Benchmark crude prices have swung violently as markets react to conflicting signals over potential negotiations between the United States and Iran. North Sea Dated crude traded in a nearly $50-per-barrel range during April, averaging $120.36 per barrel for the month. The IEA said prices briefly surged as high as $144 per barrel before falling back below $100 and rebounding again as uncertainty persisted. The agency warned global oil markets are likely to remain in deficit through at least the fourth quarter.
Key Takeaways:
1. IEA forecasts global oil demand will contract by 420,000 barrels per day in 2026 to 104 million barrels per day due to Strait of Hormuz disruption.
2. Global oil supply fell 1.8 million barrels per day in April to 95.1 million barrels per day, bringing total losses since February to 12.8 million barrels per day.
3. Cumulative supply losses from Gulf producers now exceed 1 billion barrels, which IEA calls an unprecedented supply shock.
4. Global oil inventories fell by 129 million barrels in March and 117 million barrels in April; OECD on-land stocks dropped 146 million barrels in April alone.
5. North Sea Dated crude traded in a nearly $50-per-barrel range during April, averaging $120.36 per barrel for the month.
