The International Energy Agency (IEA) has warned that disruptions in the Strait of Hormuz are causing one of the largest oil market shocks in modern history, as global supply losses deepen and inventories fall at a record pace.
In its latest Oil Market Report released Tuesday, the agency said global oil demand is now expected to decline by 420,000 barrels per day in 2026 to 104 million barrels per day, marking a sharp reversal from earlier forecasts.
The IEA said the steepest decline is expected in the second quarter of 2026, driven mainly by weaker demand in aviation and petrochemicals.
At the same time, oil supply continues to tighten as tensions surrounding Iran and the Strait of Hormuz disrupt Gulf exports. Global oil supply fell by 1.8 million barrels per day in April to 95.1 million barrels per day, while total losses since February have reached 12.8 million barrels per day.
According to the report, supply from Gulf producers affected by the Strait disruption remains far below pre-war levels, with cumulative losses now exceeding one billion barrels.
The agency said global oil inventories are being drained rapidly, despite efforts by countries and producers to adapt. Saudi Arabia and the UAE have redirected some exports through routes outside the Strait, while producers including the United States, Brazil and Canada have increased shipments to Asia.
Global oil stocks dropped sharply in March and April, adding pressure to already volatile markets. Benchmark crude prices fluctuated heavily during April, briefly surging to as high as $144 per barrel before falling back amid uncertainty over possible negotiations between the United States and Iran.
The IEA also warned that refinery activity is slowing significantly due to infrastructure damage, export restrictions and lower crude availability, increasing pressure on fuel markets, particularly jet fuel and middle distillates.
While the agency expects some recovery in Strait of Hormuz flows later this year, it warned global oil markets are likely to remain under pressure through at least the end of 2026.
