IEA Warns Crude Oil Deficit to Double in Q3 Amid US-Iran Negotiations Collapse
The global energy market was hit with a double shock in August when US-Iran negotiations to end the Gulf conflict came to a standstill, and the Strait of Hormuz was blocked. This move drove WTI crude oil prices up towards $82 per barrel.
On the other hand, the US July CPI year-on-year growth rate fell to 3.4%, with core CPI dropping to 2.5%. The weak performance of a 23,000-person decline in nonfarm payrolls for July raised concerns about high interest rates squeezing demand in the real economy.
The International Energy Agency (IEA) has warned that the supply crisis is far from over. According to their latest report, global oil supply and demand forecasts have been sharply revised down. Global crude oil demand in 2026 is expected to decline by 1.6 million barrels per day, while average daily supply fell by 4.3 million b/d year over year.
The Strait of Hormuz blockage has disrupted 20% of global seaborne crude oil shipments, and the Bab al-Mandeb at the southern end of the Red Sea has also been thrown into turmoil by Houthi attacks and US naval interdiction operations. This simultaneous blockage has upended the rhythm of global crude-oil trade.