IEA Forecasts Global Oil Demand to Decline in 2026 Amid Iran Conflict

The International Energy Agency (IEA) projects a decline in global oil demand in 2026, marking the first annual drop since the COVID-19 pandemic began in 2020. According to the IEA's recent report, demand is expected to fall by one million barrels per day, primarily due to Iran's closure of the Strait of Hormuz, a critical shipping route for oil and gas exports. This closure has disrupted exports through the Persian Gulf, significantly impacting supply.

The IEA's forecast assumes a continued ceasefire and a gradual reopening of the Strait of Hormuz, which would allow oil producers to restart fields and refineries in the Middle East and elsewhere. However, this assumption is uncertain following recent exchanges of fire between the United States and Iran, which nearly halted ship movements through the strait. The agency's economists emphasized that the ongoing conflict highlights the risks of failing to reach a lasting peace agreement, which is essential for stabilizing oil markets.

Toril Bosoni, head of the IEA's oil and markets division, told CNBC's Squawk Box Europe that the oil market recovery will not be "quick or linear," warning of a highly unstable and uncertain situation in the region. The IEA's outlook underscores the fragile geopolitical environment affecting global energy supplies and demand dynamics going forward.