Global oil demand is set to drop for the first time since 2020, according to the International Energy Agency as the war in Iran saw traffic through the Strait of Hormuz plummet.
Concretely, figures are expected to decline by 1 million barrels a day this year. The entity noted that the drop is "highly skewed in both product and regional terms," considering practically all of it was a result of the key waterway's closure.
The scenario marks a sharp reversal compared to the scenario envisioned before the war, when the body expected global demand growth of roughly 930,000 barrels per day in 2026.
Researchers noted that recovery could be seen, but that scenario could be reversed if renewed clashes by the U.S. and Iran threaten the scenario.
"While the global oil market balance looks set to swing back to surplus towards the end of the year, the forecast hinges on the assumption that tanker flows through the Strait will gradually recover, allowing producers to restart fields and refiners in the Middle East and elsewhere to resume product shipments," reads a passage of the report.
"Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalization in oil markets," the document added.
In fact, traffic through the strait has already declined. Matt Smith, director of commodity research at the trade intelligence firm Kpler, told CNBC that only 13 ships crossed the waterway on Wednesday, compared to an average of 33 per day over the previous week.
Moreover, Joint Maritime Information Center again raised the threat level in the Strait of Hormuz to severe after clashes resumed. It is the second-highest level in the NGO's scale, only behind critical. It had been lowered to substantial after the two countries signed a memorandum of understanding to end the war and kick off nuclear negotiations.
The IEA has repeatedly warned that higher crude prices and transportation disruptions are suppressing fuel consumption around the world, particularly in transportation and industrial sectors. Despite weaker demand, the agency believes supply growth remains relatively robust, creating the potential for a significant surplus once geopolitical disruptions ease. In this context, a U.S. official told MS Now that the U.S. and Iran will engage in technical talks despite the renewed clashes.
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