IEA: Global Oil Demand Set for First Annual Decline Since Covid as Hormuz Disruption Weighs on Markets

VG Markets · 2026-07-10T10:19:47Z
IEA: Global Oil Demand Set for First Annual Decline Since Covid as Hormuz Disruption Weighs on Markets

Global oil demand is projected to decline by 1 million barrels per day this year, marking the first annual contraction since the COVID-19 pandemic in 2020, according to the International Energy Agency's latest monthly report released on Friday. The agency cited disruptions to Middle East production and exports following the Israel-Iran conflict as a major contributing factor.

Market developments

Supply disruption: The closure of the Strait of Hormuz, a key shipping route for approximately one-fifth of global oil flows, has disrupted crude exports from the Persian Gulf. According to the IEA, the resulting demand contraction has been uneven across products and regions.

Base-case outlook: The IEA's central scenario assumes that the ceasefire remains in place and the Strait of Hormuz gradually reopens, allowing the market to return to a surplus later in the year. However, this outlook became more uncertain after renewed U.S.-Iran military actions contributed to another slowdown in tanker traffic.

Additional supply factor: The IEA lowered its Russian oil supply forecasts by 85,000 barrels per day for 2026 and 150,000 barrels per day for 2027, projecting average production of 8.8 million barrels per day. The revision reflects the impact of continued drone attacks on Russian refineries and storage facilities. Russian production is now projected at 8.9 million barrels per day in 2026 and 8.8 million barrels per day in 2027, compared with 9.2 million barrels per day in 2025.

Brent crude traded near US$76.11 per barrel on Friday, remaining broadly unchanged on the day while still on track for a weekly gain as markets continued to balance expectations of a contained conflict against the risk of further geopolitical escalation.

Market focus: The IEA noted that reopening the Strait of Hormuz remains important for restoring normal market conditions. Developments related to Gulf shipping routes, tanker traffic, and U.S.-Iran relations are likely to remain among the key factors influencing oil market sentiment and Brent crude price volatility in the near term.

Source: IEA Monthly Oil Market Report, Investing.com