Phoenix 24
War and disrupted trade are reshaping the energy market.
PARIS, FRANCE — July 2026. Global oil demand is expected to decline by one million barrels per day this year, marking its first annual contraction since the COVID-19 pandemic in 2020. The International Energy Agency attributed the reversal largely to the conflict between the United States and Iran and the disruption of Gulf exports through the Strait of Hormuz.
The reduction is uneven across regions and petroleum products. Import-dependent Asian economies have suffered some of the greatest losses, while petrochemical feedstocks such as naphtha and liquefied petroleum gas have been particularly affected. High prices, restricted availability and weaker industrial activity have also reduced consumption.
Global supply recovered by 4.1 million barrels per day in June, reaching 98.8 million after the partial reopening of the Strait of Hormuz. Production nevertheless remained 9.4 million barrels below prewar levels. Gulf exports increased to 16.1 million barrels per day, still well below the previous average of 24 million.
The IEA expects supply to contract by 3.7 million barrels per day across 2026, leaving the market with a daily deficit of approximately 860,000 barrels. Global inventories rose by 21 million barrels in June after declining by 360 million between March and May. Petrol and diesel markets remain particularly tight because refinery output and fuel shipments have recovered more slowly than crude exports.
Demand could rebound by two million barrels per day in 2027, while recovering production may create a substantial market surplus. That outlook depends on stable navigation through Hormuz and a lasting reduction in hostilities. Renewed attacks involving Iran and the United States have already placed the fragile recovery at risk.
Oil consumption is falling—but geopolitical instability is keeping energy security under pressure.