IEA Warns of Sharp Oil Demand Decline Amid Strait Closure and High Fuel Prices

The International Energy Agency (IEA) forecasts a sharp decline in global oil demand this year due to the prolonged closure of the Strait of Hormuz and elevated fuel prices. In its August Oil Market Report, the IEA predicts that global oil demand will fall by 1.6 million barrels per day (mb/d) in 2026, exceeding the previously projected decline by 510,000 b/d.

The decline is expected to ease from 4.9 mb/d in the second quarter to 2.8 mb/d in the third, before demand returns to growth in the final quarter of 2026. For 2027, the agency expects global oil demand to increase by 2.4 mb/d.

The supply of oil rose by 2.4 mb/d in July to 101.5 mb/d but remained 6.3 mb/d below year-earlier levels, with 8.3 mb/d of Gulf production still offline due to renewed hostilities and maritime disruptions.