Oil demand worldwide is expected to dip this year, the International Energy Agency said in a report.
The expected decline in oil demand would be the first time since the peak of the COVID-19 pandemic in 2020, the IEA report said.
The agency report has also forecast that a rebound in demand would happen next year by 2 million barrels (bpd)per day from a projected decline by 1 bpd this year. The estimated recovery is expected to happen by only mid-2027, according to the agency's forecast.
The estimated drop in demand is likely to be spurred by higher oil prices as well as supply disruptions, mainly caused by the Middle East conflict and the resultant threat to shipping through the Strait of Hormuz.
The disruptions have hit the world unevenly, the Associated Press reported quoting the IEA report.
The IEA report said oil demand worldwide averaged just 97.9 million barrels per day in May, down 5.3 million barrels per day from a year ago. The report pointed out that the huge chunk of the slump was reported from Asia, which is heavily dependent on oil from the Middle East.
Demand slumped in China, which reported a decline of 1.5 million barrels per day, which is a 9% dip, considered the the largest slump globally, the report said.
The US market, though, bucked the declining trend in oil demand. Gasoline use spiked in the US in the second quarter of 2026, tough prices at gas stations were 50% higher in May than before the Middle conflict, the report said.
After the Middle East conflict between Washington and Tehran erupted following the US-Israeli strikes on Iran late in February, vessels loaded with crude oil remained stranded in the Persian Gulf for more than three months, as Iran enforced a closure of the international waterway. A fifth of the global oil supplies and a huge chunk of gas shipments passed through the chokepoint before the conflict, leading to a major spike in oil prices as the conflict went on.
Oil prices rose to as high as $120 a barrel at one point in time, stoking inflationary concerns worldwide.
An uneasy ceasefire arrangement worked out last month has calmed oil prices, but after renewed hostilities this week in the contentious Strait, oil prices remained on track for weekly gains of 5% this week.
Washington has said the ceasefire is over, though the US has agreed to hold talks. Iran has said it is merely hosting Qatari negotiators, but its Foreign Minister Abbas Araghchi and Omani Foreign Minister Sayyid Badr al-Busaidi are slated to hold talks in Muscat on Saturday to discuss the crisis over the Strait of Hormuz.
As Iran is still seeking total control of the Strait of Hormuz and the US seeks a pledge from Tehran that it would stop firing on commercial ships, a restoration of pre-war conditions seems unlikely, according to Burkhard.
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.
