Global oil demand is on course to fall this year for the first time since the height of the pandemic in 2020, the International Energy Agency said on Friday, as the Iran war disrupts Middle East production and export routes. In its latest monthly report, the agency projects demand of about 103.5 million barrels a day in 2026 — down roughly 1 percent, or close to a million barrels a day year on year — a contraction it describes as highly skewed by both product and region.
Where the demand went
The disruption traces largely to the closure of the Strait of Hormuz, the vital artery for Gulf oil and gas, which choked exports and pushed prices sharply higher. China posted by far the largest drop — around 1.5 million barrels a day, a roughly 9 percent decline — after cutting crude purchases sharply as prices climbed and temporarily pausing additions to its strategic reserve. The main exception was the United States, where gasoline demand actually rose in the second quarter even with pump prices running about 50 percent above pre-war levels, helped by higher-income drivers and a return to office commuting.
The IEA’s Toril Bosoni described the region as a “very uncertain and unstable situation.” — IEA head of oil and markets, via CNBC
The fragile path back
The forecast rests on an assumption now under visible strain: that a ceasefire holds and the Strait gradually reopens. On that basis, the IEA sees the market swinging back toward surplus late this year and into 2027, when demand is expected to rebound to roughly 105.5 million barrels a day. Renewed exchanges of fire in the Gulf, the agency warned, underline the risk of not reaching a lasting peace — which it calls a prerequisite for normalisation. For corporate planners, the exposure is concentrated: petrochemical feedstocks and aviation fuel have been hit hardest, and delayed 2026 investment decisions are the variable that will shape how quickly supply, and confidence, recover.
