The International Energy Agency (IEA) has issued a stark warning that global oil supply will shrink this year due to the ongoing war in the Middle East, which has disrupted exports and sent prices soaring. According to the agency's monthly report released on Tuesday, supply is expected to fall by 1.5 million barrels per day (bpd), reversing earlier forecasts of growth.
Key Takeaways
The International Energy Agency (IEA) warns that global oil supply will shrink by 1.5 million barrels per day due to the Middle East war, marking the largest oil supply shock in history. Prices have surged near $150 a barrel, with Europe facing potential jet fuel shortages by June if it cannot replace half of its usual Middle Eastern supplies.
This disruption marks what the IEA calls the largest oil supply shock in history, significantly reshaping the global oil market and sweeping away previous expectations of a sizeable surplus in 2026. Oil prices have surged near record highs of $150 a barrel, prompting governments to introduce fuel-saving measures.
The conflict has led to attacks on Middle East energy assets and Iran's effective closure of the Strait of Hormuz, which has hit production and exports hard. The IEA now predicts an 80,000 bpd drop in demand growth this year, down from a projected rise of 640,000 bpd in March. The agency emphasized that resuming flows through the Strait of Hormuz is crucial for easing pressure on energy supplies and prices.
In addition to supply disruptions, the IEA forecasts imply that demand destruction will spread as scarcity and higher prices persist. Europe could start seeing physical shortages of jet fuel by June if it can only replace half of its usual Middle Eastern supplies. Global jet fuel and kerosene demand averaged 7.8 million barrels per day in 2025, with Gulf exports being the largest source to the global market, averaging nearly 400,000 bpd.
The deepest cuts in oil consumption have come from the Middle East and Asia-Pacific regions, particularly for naphtha, LPG, and jet fuel. The Organization of the Petroleum Exporting Countries (OPEC) has also lowered its prediction for world oil demand in the second quarter but kept its full-year outlook unchanged.
The IEA's base case forecast is for regular deliveries of oil and gas from the Middle East to resume by mid-year, although below pre-conflict levels. However, a more severe scenario with longer-term supply disruptions could draw almost 2 billion barrels of oil from stocks and force demand to fall by an average of 5 million bpd year-on-year from the second quarter to the fourth quarter.
How this summary was created
This summary synthesizes reporting from 4 independent publishers using AI. All sources are cited and linked below. NewsBalance is a news aggregator and media literacy tool, not a news publisher. AI-generated content may contain errors or inaccuracies — always verify important information with the original sources.