IEA Slashes 2026 Oil Demand Forecast Again as Hormuz Closure Disrupts Global Supply

The International Energy Agency (IEA) has sharply lowered its forecast for global oil demand in 2026, citing the continued closure of the Strait of Hormuz, high fuel prices and ongoing disruptions to crude supplies.

In its latest monthly report released on Wednesday, the Paris-based agency projected that global oil demand would decline by 1.6 million barrels per day (mb/d) this year.

The new forecast represents a significant deterioration from the 1 million barrels per day decline projected in the IEA’s July report.

Hormuz crisis weighs on oil consumption

The IEA said the prolonged disruption around the Strait of Hormuz remains one of the biggest factors affecting the global oil market.

The strategic waterway normally carries about one-fifth of global oil supplies, but tanker and cargo traffic has been severely restricted following the escalation of the conflict involving Iran.

According to the agency, high fuel prices and uncertainty over supplies are discouraging oil consumption in major markets.

“The ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption,” the IEA said.

Supply remains under pressure

Global oil production increased by 2.4 million barrels per day in July, reaching approximately 101.5 million barrels per day.

However, production remained 6.3 million barrels per day below the level recorded a year earlier, highlighting the scale of the disruption facing the market.

The IEA said renewed hostilities and maritime disruptions in July and early August have slowed efforts to restore lost production and normalise international oil flows.

The agency now expects global oil supply to decline by an average of 4.3 million barrels per day in 2026, before recovering next year.

Diplomacy fails to calm market uncertainty

The oil market remains highly volatile despite repeated claims of a ceasefire and suggestions that an agreement to reopen the Strait of Hormuz could be reached soon.

The IEA described the repeated diplomatic developments as “sudden diplomatic pivots”, noting that only a limited number of vessels have been permitted to pass through the crucial waterway.

The uncertainty has contributed to sharp fluctuations in global crude prices and increased concerns about the security of international energy supplies.

Demand could recover later in 2026

Despite the sharp downgrade for the year as a whole, the IEA expects global oil demand to begin recovering in the fourth quarter of 2026.

The agency’s latest outlook suggests that the longer the disruptions around Hormuz persist, the greater the pressure will be on both oil consumption and global economic activity.

With the Strait remaining largely closed and tensions still unresolved, energy markets are expected to remain highly sensitive to developments in the region.