The International Energy Agency (IEA) has projected that global oil supply may fail to meet demand in 2026 due to ongoing disruptions linked to the Iran conflict.
International Energy Agency stated that disruptions arising from the Iran conflict have materially altered global oil market projections for 2026.
According to the agency, cumulative supply losses from Gulf oil producers have already crossed 1 billion barrels, with more than 14 million barrels per day of oil production currently shut in.
The IEA described the situation as a significant supply shock linked to ongoing restrictions affecting tanker movement through the Strait of Hormuz.
The agency now expects global oil supply to remain around 1.78 million barrels per day below total demand in 2026.
This marks a substantial revision compared to the previous month’s forecast, which had projected a surplus of approximately 410,000 barrels per day. Earlier projections released in December had estimated a surplus close to 4 million barrels per day.
The revised estimates reflect worsening supply disruptions and lower production expectations across key oil-producing regions.
The IEA noted that the conflict has severely affected oil production and transportation infrastructure in the Gulf region.
Supply is now expected to decline by nearly 3.9 million barrels per day during 2026, significantly deeper than the agency’s earlier estimate of a 1.5 million barrel per day reduction.
The report also highlighted continuing constraints on tanker movement through the Strait of Hormuz, a strategically important global energy shipping route.
While supply conditions have tightened, the IEA also reduced its global oil demand outlook due to weaker economic activity and elevated energy prices.
The agency now expects oil demand to decline by around 420,000 barrels per day this year, compared with an earlier forecast of an 80,000 barrel per day decrease.
According to the report, higher crude prices and geopolitical uncertainty are contributing to slower economic growth and reduced fuel consumption in several regions.
The Strait of Hormuz continues to remain central to global energy market concerns due to its role in transporting a large share of international crude oil exports.
The IEA’s base-case scenario assumes a gradual resumption of tanker traffic through the route from the third quarter onwards. However, prolonged disruptions could continue to affect global energy supply chains and pricing trends.
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The IEA’s latest report indicates that the ongoing Iran conflict is creating significant pressure on global oil markets, with supply projected to fall below demand in 2026.
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Published on: May 13, 2026, 3:13 PM IST
Neha Dubey
Neha Dubey is a Content Analyst with 3 years of experience in financial journalism, having written for a leading newswire agency and multiple newspapers. At Angel One, she creates daily content on finance and the economy. Neha holds a degree in Economics and a Master’s in Journalism.
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