The International Energy Agency has downgraded its forecast for global oil demand in 2026 due to war in the Middle East and surging hydrocarbon prices.
The Paris-based energy agency of the Organisation for Economic Co-operation and Development now expects global demand to fall by 1.6 million barrels per day on an annual basis. That marks a deeper decline than its previous projection in July, which anticipated a drop of 1 million barrels per day.
Global oil consumption for 2026 is now placed at 103.29 million barrels per day, down from the 103.46 million barrels per day forecast in July.
In its revised assessment, the agency noted that the prolonged blockade of the Strait of Hormuz and rising fuel costs are continuing to weigh heavily on global oil consumption.
Despite the overall annual decline, the organization projects a gradual quarterly improvement. After a demand drop of 4.9 million barrels per day in the first quarter and a 2.8 million barrel per day decline in the third quarter, consumption is expected to increase by 0.58 million barrels per day during the final quarter of the year.
Strait of Hormuz Blockade Disrupts Global Supply
Global crude supply has taken a severe hit from the extended blockade at the Strait of Hormuz, which has disrupted international supply chains and reduced the market availability of oil products.
Approximately 8.3 million barrels per day of oil production from the Gulf region are currently missing from world supply because of the Hormuz crisis. The energy agency described the loss as the largest disruption to global oil production ever recorded.
The International Energy Agency was established as an autonomous body to advise member countries on energy security and market stability. The Strait of Hormuz, situated between the Persian Gulf and the Gulf of Oman, serves as the world's most critical maritime transit point for crude oil shipments.
Supply pressures have been exacerbated further by Ukrainian strikes against Russian oil refineries. The resulting shortage of refined fuels drove Atlantic basin refining margins to record levels in July, leaving international market prices for diesel at double the cost of crude oil.
Production Forecasts and Market Surplus Prospects
World oil output is now expected to contract by an average of 4.3 million barrels per day in 2026 to 102.02 million barrels per day. Production is forecast to recover strongly next year, expanding by 8.3 million barrels per day to reach 110.3 million barrels per day.
The energy agency indicated that a de-escalation of the war would allow oil flows to resume gradually in the coming months. Such a recovery could potentially create a supply surplus toward the fourth quarter of 2026, allowing countries to rebuild their crude reserves.
However, the report emphasized that these prospects for market improvement remain fragile. The agency warned that significant risks persist even if the market returns to surplus toward the end of the year, noting that the necessity of lifting the Hormuz blockade has grown urgent as previously available stocks deplete rapidly.
