IEA Trims Global Oil Demand Forecast Amid Ongoing Middle East Tensions

The International Energy Agency (IEA) has revised its global oil demand forecast downwards for the second time this year, citing ongoing tensions in the Middle East. The Paris-based agency predicts a 2.5 million barrel per day decrease in oil consumption by 2026 compared to 2025, surpassing its previous estimate of 1.6 million barrels.

The IEA attributes this revised forecast to the continued impasse between the US and Iran, which has led to attacks on Iranian oil tankers and concerns over further supply disruptions. As a result, oil prices have surged above $100 per barrel for the first time in weeks.

The agency also warns of impending price hikes in diesel costs, with current levels surpassing 200% of pre-war prices in some regions. The IEA emphasizes that supplies will not return to normal until 2027, as the Strait of Hormuz remains under Iranian control and Houthi rebels continue their advance on the Bab al-Mandeb Strait.

The agency stresses the need for resolution to the conflict in the Middle East and the ongoing Russia-Ukraine war to prevent further market tightening and demand destruction. With global refining capacity stretched to its limits, a continued escalation of tensions could exacerbate energy costs over the winter months.