The IEA warns that the impact of the Hormuz crisis is intensifying: the global oil market is facing the biggest supply gap in five years

The Zhitong Finance App learned that the International Energy Agency (IEA) released its latest monthly report on Wednesday, warning that as war reignites in Iran and the Strait of Hormuz continues to be blocked, the global oil market is facing a sharp widening supply gap. Inventory consumption is far exceeding expectations, and even high oil prices are causing significant damage to demand.

According to the IEA, the oil market is facing a supply shortage of 1.8 million barrels per day in the current quarter due to “renewed hostilities and disruptions in maritime transportation” that hinder the recovery of production, and global inventory consumption is more than double the rate previously estimated. Looking ahead to the full year of 2026, the supply and demand deficit is expected to reach its highest level in five years. The report drastically raised the forecast for the decline in global oil supply this year from 3.7 million barrels per day to 4.3 million barrels, and the total supply will drop to about 102 million barrels per day, the lowest forecast for the year.

At a time when inventories are tightening again, fuel prices continue to rise and are violently squeezing consumption. The IEA further lowered the estimated decline in global oil demand in 2026 to 1.6 million barrels per day, an increase of 510,000 barrels over the previous month's forecast, and a decline of nearly 50% deeper than the initial forecast. This is the biggest annual decline in average demand since the COVID-19 pandemic in 2020. However, the IEA expects demand to gradually pick up during the year and return to growth in the fourth quarter.

Currently, the stalemate over the Strait of Hormuz continues. The brief suspension of fire between the US and Iran in mid-June caused oil exports to the Persian Gulf to resume, but since July, shipping and regional energy infrastructure have been attacked again. Both sides have publicly blamed each other, and have so far failed to reach any agreement on reopening this key waterway.

The IEA said in its report: “Reaching an agreement to reopen Hormuz and guarantee the smooth flow of the Mander Strait is still elusive, and we have to lower our supply estimates for the rest of the year again.”

Supply-side disruptions don't completely turn into a worst-case scenario, but they are costly. Saudi Arabia and the United Arab Emirates have used alternative pipelines, and shuttle tankers have formed a transportation network near the Strait of Hormuz. US Secretary of Energy Chris Wright revealed on Tuesday that in the past week, about 9 million barrels of oil have managed to be shipped around the blockade every day, which is almost half of the pre-war level. However, it is difficult for these workarounds to completely fill the gap — global oil supply in July was still 6.3 million barrels per day lower than in the same period last year, according to IEA data.

As a result, inventories are being reduced at a dangerous rate. Currently, US crude oil inventories have fallen below 300 million barrels, the lowest level in more than 40 years. In March of this year, IEA member states announced a record release of emergency oil reserves. The agency stated that countries such as the United States, Japan, and Germany will face heavy pressure to replenish reserves in the future. “Although the market is expected to resume oversupply by the end of this year, the risk is still huge. The urgency of reopening the strait is increasing day by day, and the previously available inventory buffer is rapidly being exhausted,” the IEA warned.

Due to severe restrictions on global refining capacity, prices of refined oil products such as gasoline and diesel have risen even more dramatically, increasing the burden on consumers. Brent crude oil once surpassed $100 per barrel last month, but it also fell back to around $70. The latest trade was slightly below $90. Fluctuations in oil prices were partially suppressed by traders keeping an eye on any signal that a cease-fire agreement might be reached, but analysts warned that this state of relative restraint would be difficult to sustain.

Recently, the International Monetary Fund (IMF) also lowered its annual global economic growth forecast to 3% from 3.3% before the war broke out in Iran. IMF Managing Director Georgieva said: “Right now, all paths lead to higher prices and slower growth.”