Global oil demand will fall further than previously expected this year as the effects of the closure of the Strait of Hormuz deepen, the International Energy Agency said on Wednesday.
The IEA predicts demand will fall by 1.6 million barrels per day in 2026. This is 510,000 barrels per day more than the previous monthly forecast for July.
The agency said high fuel prices will continue to weigh on consumption, but it expects demand to recover throughout the year and return to growth in the final quarter.
The situation in the Strait of Hormuz remains in turmoil, with an agreement between the US and Tehran to open the vital waterway elusive as both sides continue to make public demands.
The IEA said on Wednesday that “resurgence of hostilities and maritime disruption” are undermining efforts to increase global oil supplies, with oil supplies falling by 6.3 million barrels per day in July compared to the same month a year ago.
That caused fluctuations in oil prices. international benchmark brent crude oil Prices have fallen from more than $100 per barrel last month to nearly $70 per barrel. It was recently seen trading at just under $90 per barrel.
Global inventories are “rapidly decreasing”
Fears that the strait closure in March would destabilize global oil shortages have not materialized, due to factors such as a sharp decline in imports from China, the use of alternative shipping routes, and destocking. U.S. crude oil inventories have fallen below 300 million barrels, the lowest level in more than 40 years, data showed this week.
The IEA announced Wednesday that global observed oil inventories fell below 7.9 billion barrels in July for the first time since April 2025.
“While the market is expected to return to profitability towards the end of this year, risks remain significant and previously available inventory buffers are rapidly depleting, increasing the urgency to reopen the Channel,” the report said.
Oil price gains have been relatively muted as traders continue to jump on signs that a deal is on the horizon, but analysts warn that this won’t last forever.
Consumers are feeling the pain as refining capacity, which drives the prices of products like gasoline and diesel, is severely constrained.
The International Monetary Fund has lowered its annual economic growth forecast to 3% from 3.3% since the outbreak of war with Iran in February, but IMF Managing Director Kristalina Georgieva said earlier this year that “all roads now lead to higher prices and slower growth.”
