IEA Warns of Deepening Oil Supply Crunch as Iran Conflict Stalls Hormuz Reopening

The International Energy Agency issued a sharply downgraded outlook for global oil supply on August 12, cutting its 2026 forecast by enough to show a full-year decline of 4.3 million barrels per day compared with 2025, roughly 4 percent of total global output. The agency cited continued closure of the Strait of Hormuz and disruptions at the Bab al-Mandeb Strait, with an estimated 8.3 million barrels per day remaining shut-in due to the ongoing conflict. The IEA also cut its 2026 demand forecast by 1.6 million barrels per day, a reduction of 510,000 barrels per day more than its July estimate, as persistently high fuel prices erode consumption.

The agency said demand is expected to stay under pressure through most of the year before returning to growth in the fourth quarter. US-Iran negotiations over reopening Hormuz remain deadlocked, with Washington intensifying pressure on Tehran while both sides continue to issue public demands without reaching an agreement. Oil prices moved little on the day as markets balanced the worsening supply outlook against the demand destruction that the same supply shock has caused.