IEA Cuts Oil Demand Forecast as Middle East Conflict Drives Up Prices
The International Energy Agency (IEA) has cut its forecast for global oil demand in 2026, citing the ongoing Middle East conflict and resurgent energy prices. The agency now expects a decline of 2.5 million barrels per day, up from its previous forecast of 1.6 mb/d in August.
The IEA attributed the revised forecast to the recent escalation of the war in the Mideast, which has damaged oil infrastructure and constrained refining capacity. This has led to soaring diesel prices, with the US benchmark West Texas Intermediate hitting a peak of over $104 per barrel on Friday.
The agency warned that renewed attacks in the Gulf and the Bab El Mandeb choke point could further hamper oil flows and lead to increased demand destruction. It also noted that Ukrainian strikes on Russian refineries are driving up global fuel prices, with diesel costs in the US surpassing $200 per barrel, 94% above pre-war levels.
The IEA emphasized the need for progress in resolving the conflict in the Middle East and the Russia-Ukraine war to avoid further market tightening. The agency's warning came as Asian stocks sank on Friday following a forecast-topping US inflation report and rising bond yields.