Global oil demand could decrease for the first time since 2020, following months of oil trade restrictions in the Middle East and ongoing geopolitical turmoil, the International Energy Agency (IEA) said on 10th July. This expectation is echoed in OPEC's most recent 2026 global oil demand growth forecast.The global demand for oil is expected to fall by around 1 million bpd year-on-year in 2026, which would be the first annual decline since that which was experienced during the Covid-19 pandemic in 2020, according to a recent IEA report. The IEA blames the decline on the U.S.-Israeli-led war on Iran and resulting geopolitical unrest across the Middle East.A large proportion of the world's oil supply has been disrupted for several months, following the closure of the Strait of Hormuz – a key trade corridor connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. The Strait is used to transport roughly 20 per cent of the world's oil when fully operational, but only a small proportion of that has passed through the waters in recent months.It remains uncertain just how long the Strait will be closed or movement restricted, as the conflict with Iran continues. The annual global oil demand will depend heavily on how long the energy trade between Asia and Europe remains constrained.Set OilPrice.com as a preferred source in Google here.The IEA's forecast is based on the assumption that a ceasefire will support the gradual reopening of the Strait, although ongoing hostilities between the U.S. and Iran are casting a shadow over potential peace agreements. Several tankers have fallen under attack in July, leading traffic in the Strait to slow significantly.The IEA wrote in its report, "While the global oil market balance looks set to swing back to surplus towards the end of the year, the forecast hinges on the assumption that tanker flows through the Strait will gradually recover, allowing producers to restart fields and refiners in the Middle East and elsewhere to resume product shipments." It added, "Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalisation in oil markets."The IEA report estimates that global supply could fall by 3.7 million bpd in 2026, leaving a shortfall of around 860,000 bpd relative to global demand. This figure is expected to climb to 7.5 million bpd in 2027, assuming the Strait of Hormuz is reopened. The global response to the conflict, which has led non-Gulf states to pump more oil and countries worldwide to seek alternative energy supplies, has reduced demand from pre-war levels. This could help support a surplus in late 2026 if the Strait reopens, helping countries to refill their reserves.The world's oil production climbed by 4.1 million bpd in June to reach 98.8 million bpd as the Strait of Hormuz was partially reopened. However, this figure is still around 9.4 million bpd lower than the pre-war level. The restrictions on energy trade through the Strait have led several countries to seek different trade routes or turn to alternative energy sources, such as renewables and coal, to fill the gap.The Organisation of the Petroleum Exporting Countries (OPEC) lowered its world oil demand growth forecast for 2026 in its monthly report on 13th July, to 780,000 bpd, marking the third consecutive downward revision. OPEC's outlook for growth has been more optimistic than that of other forecasters, such as the IEA, since the start of the war in February.OPEC still anticipates a growth in global demand for 2027, in spite of the severe shortages and change in behaviour from many countries worldwide so far this year. "The global economic growth dynamic in the first half of 2026 has remained broadly resilient," OPEC stated in the July report. "Potential moderations in geopolitical tensions may provide some upside for global growth in the second half of 2026 if energy markets and trade flows stabilise further," the organisation added.OPEC had previously stated that it expected demand growth to be around 970,000 bpd this year. For 2027, it expects global oil demand to increase by 1.94 million bpd, which is 210,000 bpd more than the organisation stated in its previous forecast. OPEC+, which includes allies such as Russia, was hoping to increase output across its states starting in April, although the ongoing closure of the Strait of Hormuz made it impossible to reach production targets. Output from OPEC+ states averaged 36.28 million bpd in June, marking an increase of around 3 million bpd from May, according to the report.Even with OPEC's more optimistic forecast, a decrease in the world's oil demand is likely in 2026. Whether or not this trend will continue into 2027 depends largely on when and to what extent the Strait of Hormuz will reopen. However, as the heavy dependence on the Middle East becomes increasingly evident, many countries will likely look for a more diverse range of energy supplies and will seek to establish regional supply chains to boost energy security moving forward.By Felicity Bradstock for Oilprice.com More Top Reads From Oilprice.comAI Boom Sends U.S. Electricity Demand to New HighWorld-First Floating Wind Technology to Help Power Oil RigsGovernment Takes Control of British Steel, Citing National Interest