The International Energy Agency (IEA) announced that global oil demand is projected to decline more than previously anticipated, with a forecasted drop of 1.6 million barrels per day in 2026, which is 510,000 barrels per day lower than its earlier estimate in July.
The closure of the Strait of Hormuz has exacerbated this decline, as ongoing tensions between Washington and Tehran have prevented a resolution. Although demand is expected to rebound in the final quarter of the year, high fuel prices are expected to continue suppressing consumption.
The IEA noted that global oil supply remains 6.3 million barrels per day lower year-on-year as of July, contributing to price volatility. Brent crude oil prices have fluctuated significantly, recently trading just under $90 a barrel after surpassing $100 last month.
Despite initial fears of a global oil shortage following the strait's closure in March, these concerns have eased due to reduced Chinese imports, alternative shipping routes, and inventory drawdowns. However, U.S. crude oil stockpiles have fallen below 300 million barrels, the lowest in over 40 years, indicating tightening supply.
The International Monetary Fund has also downgraded its economic growth forecast to 3% from 3.3% since the onset of the Iran conflict, highlighting the broader economic implications of rising oil prices and constrained refining capacity