IEA Forecasts First Annual Drop in Global Oil Demand Since 2020

The International Energy Agency (IEA) has projected that global oil demand will decline by 1 million barrels per day (bpd) in 2026 compared with the previous year, marking the first annual contraction since the pandemic-related downturn in 2020.

According to the agency, the expected decline is largely linked to the impact of the Iran conflict, which disrupted crude oil production and exports across the Middle East following the closure of the Strait of Hormuz, a key route for global energy shipments.

The IEA noted that although oil producers have started gradually restoring output, the market outlook remains uncertain. Its current forecast assumes that the ceasefire will remain in place and that shipping activity through the Strait of Hormuz will continue to improve, allowing crude oil and refined product exports to recover steadily.

However, the agency cautioned that recent military tensions between the US and Iran, along with fresh attacks on commercial vessels, have increased uncertainty and could affect the pace of recovery.

The IEA also stated that the global oil market may return to a supply surplus later this year if oil flows through the Strait of Hormuz continue to normalize. However, without lasting regional stability, further disruptions to shipping could delay the recovery in Middle Eastern production and keep the global oil market under pressure.

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