US-Iran escalation threatens oil supply recovery, warns IEA

Key Points:

• The International Energy Agency (IEA) warned that renewed fighting between the US and Iran threatens to prolong the global energy crisis by disrupting oil production and exports in the Middle East, particularly through the Strait of Hormuz.
• The Strait of Hormuz, a critical waterway for about 20% of the world’s oil and liquefied natural gas exports, has seen effective closure cutting up to 14 million barrels per day, severely impacting global oil supply and prices.
• Despite a temporary lull in hostilities allowing for diplomatic efforts, the US military remains prepared to resume attacks if necessary, while Pakistan and Qatar are mediating to revive negotiations between Washington and Tehran.
• Oil prices have remained relatively stable amid market confidence in potential stabilization, but tightening inventories suggest upward price pressure may continue if conflict persists.
• Regional states and the United Nations have urged restraint to prevent escalation into full-scale war, emphasizing that the IEA’s optimistic oil market forecasts depend on a sustained ceasefire and the reopening of the Strait of Hormuz.