Global Oil Production to Fall Short of Demand in 2026 Amid Iran Conflict, IEA Warns
The International Energy Agency (IEA) has warned that global oil production is set to drop below consumption levels this year, driven by the ongoing conflict involving Iran. This disruption is expected to cause a significant shortfall in oil supply worldwide throughout 2026.
The IEA's forecasts indicate that in 2026, supply will fall short of total demand by 1.78 million barrels per day (bpd), reversing the 410,000 bpd surplus projected in last month’s report and the nearly 4 million bpd surplus forecasted in December.
The Paris-based agency stated, “Our latest supply and demand estimates suggest the market will remain significantly undersupplied through the end of the third quarter of 2026, even if the conflict ends by early June.” It added that the supply deficit in the second quarter could be as large as 6 million bpd.
According to the IEA’s base-case scenario, traffic through the strait is expected to gradually resume starting in the third quarter, potentially leading to a “modest surplus” by the fourth quarter. This would enable the rebuilding of depleted oil stocks.
The IEA also noted that supply disruptions caused a 246 million barrel reduction in global oil inventories during March and April, which may contribute to increased price volatility ahead of the peak summer demand season.
