The International Energy Agency (IEA) has revised its forecast for global oil demand, predicting a sharper decline than previously anticipated. The IEA now expects demand to decrease by 1.6 million barrels per day in 2026, marking a 510,000 barrel per day drop from its last estimate in July. This adjustment comes as the closure of the Strait of Hormuz, a critical chokepoint for global oil and LNG flows, continues to disrupt the market. The strait’s closure has already removed approximately 11 million barrels per day of crude and condensate production, significantly affecting supply and demand dynamics.
The IEA’s revised outlook reflects growing concerns over the prolonged impact of geopolitical tensions in the region. The prediction has implications for oil markets, with current pricing for crude oil all-time high predictions showing a decline in the likelihood of reaching new highs. This is evident in prediction markets, where the probability of crude oil hitting a new all-time high by September 30 is priced at 3.8%, and 12.5% by December 31, reflecting a cautious outlook.
Market participants appear to be adjusting their expectations in response to the IEA’s forecast. The downward revision in demand is consistent with a scenario where crude oil prices may not reach previous highs, especially given the ongoing regional tensions and supply chain disruptions.
