IEA cuts oil supply forecast as Iran war delays Middle East recovery

Key Points:

• The International Energy Agency (IEA) has lowered its global oil supply and demand forecasts for the remainder of the year, citing ongoing conflicts in Iran and Ukraine that are straining an already stretched oil refining system.
• The IEA expects world oil supply to decline by 5.7 million barrels per day (bpd) in 2026, a 6% drop from 2025, worsening from its previous forecast of a 4% decline.
• Global oil demand is projected to fall by 2.5 million bpd this year, a larger decrease than the 1.6 million bpd decline forecast in August, due to stalled U.S.-Iran diplomatic talks and renewed attacks near key maritime chokepoints.
• The agency emphasized that shrinking inventories and limited refining capacity increase the urgency for resolving conflicts in the Middle East and the Russia-Ukraine war to prevent further market tightening and demand destruction.
• Despite recent oil price volatility and attacks on tankers near the Strait of Hormuz, Brent crude and U.S. West Texas Intermediate futures remain near $100 per barrel, potentially ending the week above this threshold for the first time since mid-May.