IEA Warns of Worsening Oil Supply Gap Amid Middle East Conflict

The International Energy Agency (IEA) has warned that global oil supply and demand will fall further than expected this year due to ongoing conflicts in the Middle East. The IEA's monthly report states that world supply is now expected to decline by 5.7 million barrels per day, or about 6 percent, in 2026.

This drop is up from a previous forecast of around 4 percent and is attributed to a lack of progress in ending the conflict in the Middle East, which has delayed the return of normal Gulf oil flows into 2027. As a result, fuel prices have soared, with crude reaching $110 per barrel this week for the first time since May.

Raised attacks on oil tankers in Middle Eastern shipping routes have contributed to the surge in prices, along with conflict in Russia and Ukraine damaging oil refineries. Although demand is weakening under high fuel prices, supply is falling faster, causing inventories to be depleted at a record pace.

The IEA report states that global stocks fell by 3.1 million bpd in August, the lowest level since 2023. The agency emphasized the need for progress in resolving the conflict in the Middle East and the Russia-Ukraine war to avoid further market tightening.