IEA significantly lowers its global oil outlook for 2026: demand shrinks for the first time in six years, largest supply disruption in history
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The Middle East war has triggered the blockade of the Strait of Hormuz, the International Energy Agency has significantly lowered supply and demand forecasts, and global refineries face the risk of supply disruptions.
The International Energy Agency (IEA) released its monthly oil market report on Tuesday, lowering its 2026 global oil demand forecast from an increase of 640,000 barrels/day to a shrinkage of 80,000 barrels/day. This would be the first annual decline in global oil demand since the COVID-19 pandemic in 2020. IEA Director Fatih Birol stated on Monday that current crude oil futures prices still do not reflect the severity of this crisis, but the situation will soon change.
The report simultaneously sharply revised the 2026 global oil supply forecast from an increase of 1.1 million barrels/day to a decrease of 1.5 million barrels/day. The IEA characterized this supply shock as the largest interruption of oil supply in history, warning: "As supply shortages and high prices persist, demand destruction will further spread."
As a result, London crude oil futures prices have risen to near $100/barrel, but according to the agency's report, the "disconnect" between the futures and physical markets is becoming "increasingly severe".
Strait of Hormuz Nearly Cut Off, Supply Gap Historically Rare
The core of this crisis lies in the large-scale blockade of the Strait of Hormuz. IEA data shows that the volume of crude oil, fuel, and liquefied natural gas transported via the Strait of Hormuz in early April has fallen to 3.8 million barrels/day, a sharp drop of more than 80% from more than 20 million barrels/day before the crisis. Previously, this strait accounted for about 20% of global oil supply.
According to reports, in March alone, global oil supply lost 1.01 million barrels/day, a decline of about 9%. Saudi Arabia, Iraq, the UAE, and Kuwait have been forced to sharply cut production. Meanwhile, the US Trump administration's measures to block ships entering and leaving Iranian ports officially took effect this Monday, further intensifying supply pressure.
Demand Hit First, Asian Petrochemical Chain in Disarray
The IEA report points out that petrochemical raw materials are most directly affected by the war—the blockade of the Strait of Hormuz has led to a total disruption of the supply chain to Asia. The regions with the steepest demand declines are the Middle East and Asia-Pacific.
At the refining end, the IEA has sharply lowered its forecast for crude oil processing volume: In April, global daily crude oil processing is expected to be 77.2 million barrels, 5.8 million barrels lower than the agency's February forecast, and also down 5.2 million barrels year-on-year. The downward revision lasts all year, with the second-quarter forecast lowered by 2.5 million barrels/day, and the full-year 2026 forecast lowered by 950,000 barrels/day. In addition, as attacks on energy infrastructure escalate, Russia's April refinery data forecasts have also been revised down.
The IEA clearly stated in the monthly report: "The crude oil supply options for many Asian refineries remain extremely fragile." The agency also noted that if the Strait of Hormuz can gradually resume normal passage from May onwards, some Asian refineries may avoid a supply cut-off.
Record Emergency Reserve Release, Widening Futures-Spot Price Divergence
Facing spiraling energy costs, the IEA coordinated member countries—including the US, Japan, and Germany—to release a record 400 million barrels of crude oil from strategic reserves last month in an attempt to stabilize prices.
However, market pricing signals remain clearly distorted. Despite abnormal surges in crude oil futures in March, London market prices still hover below $100/barrel, and the divergence between futures and spot prices continues to widen. The IEA report calls this phenomenon "disconnect" and sees its severity intensifying. Fatih Birol publicly stated on Monday that futures prices have not fully reflected the true seriousness of the crisis.
Major Uncertainty in Medium-Term Scenario
The IEA baseline scenario assumes oil flows in the Middle East will generally return to normal before mid-year, but the report also presents a stress scenario where supply disruptions last much longer.
"In this scenario, global energy markets and national economies need to prepare for major shocks over the coming months," the IEA warns.
On the supply-demand balance front, the IEA expects global oil supply to exceed demand by 410,000 barrels/day in 2026, whereas the previous report forecast a surplus of up to 2.46 million barrels/day—meaning the loose market situation has tightened significantly. The IEA emphasizes that restoring normal passage in the Strait of Hormuz is the most critical variable to ease global energy supply tightness and price pressures.
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