Iran War Worsens Global Oil Supply Crunch

Global oil markets are facing a more severe supply squeeze than expected due to renewed escalation in the Iran war. According to the International Energy Agency (IEA), the world is experiencing a shortfall of 1.8 million barrels per day this quarter, more than double earlier forecasts.

The IEA also reduced its estimate for global oil demand growth in 2026 by nearly 50% to 1.6 million barrels per day amid higher fuel prices. Despite this reduction, stockpiles are tightening again as high fuel prices prompt a decline in consumption.

The output losses are smaller than some worst-case scenarios early in the war, having been tempered by workaround measures such as alternative pipelines and shuttle tankers plying the Strait of Hormuz. However, renewed disruptions to the Strait have derailed the recovery in oil markets.