The IEA expects global oil demand to contract by 1 million barrels per day (bpd) year-on-year in 2026, marking the first annual decline in six years.
The IEA said, “Global oil demand is projected to decline by 1 mb/d this year before rebounding by 2 mb/d in 2027.”
The agency said the slowdown has been driven largely by disruptions following the closure of the Strait of Hormuz, a critical shipping route for global oil and gas trade.
However, global oil demand is showing signs of recovery after hitting a low in May, with consumption expected to pick up on the back of seasonal demand and improved fuel supplies helping release pent-up consumption, the IEA said.
The agency expects the pace of annual demand contraction to ease from 4.8 million barrels per day (mb/d) in the second quarter of 2026 to 1.7 mb/d in the third quarter, before returning to growth of 1.2 mb/d in the fourth quarter.
While the agency said a recovery is underway, it cautioned that the outlook remains highly uncertain. Its forecast assumes a ceasefire and the gradual reopening of the Strait, allowing tanker traffic, oil production, and refinery operations to normalise.
However, renewed hostilities between the United States and Iran this week have raised fresh concerns. Attacks on ships and slower vessel movements through the Strait of Hormuz underscore the risk that any further escalation could delay the recovery and tighten global energy markets.
The IEA said the global oil market is expected to return to a surplus later this year, but only if tanker flows through the Strait recover, enabling producers to restart output and refiners in the Middle East to resume fuel shipments.
The report added that renewed exchanges of fire in the Gulf this week highlight the risks of failing to reach a lasting peace agreement, which it said is essential for the normalisation of oil markets.
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