IEA Warns Oil Supply Shortfall Will Worsen This Year Amid Ongoing Conflict
The International Energy Agency (IEA) has downgraded its oil supply forecast due to the ongoing conflict in the Middle East, particularly Iran. The agency now expects global oil supply to fall below demand this year, with a shortfall of 1.78 million barrels per day (bpd). This is a significant revision from the previous forecast, which projected a surplus of 410,000 bpd.
The IEA attributes the decline in oil supply to the damage caused by the war on Iran and its Gulf neighbors' oil infrastructure, as well as the effective closure of the Strait of Hormuz. The agency estimates that cumulative supply losses from Middle East Gulf producers already exceed 1 billion barrels, with more than 14 million bpd of oil now shut in.
According to the IEA, the market will remain severely undersupplied through the end of Q3 2026, even if the conflict ends by early June. The agency forecasts that global oil supply will fall by around 3.9 million bpd across 2026 due to the war, slashing its previous forecast of a 1.5 million bpd drop.