The International Energy Agency (IEA) has downgraded its outlook for global oil demand, projecting a 2.5 million barrels per day decline in 2026 — a sharper drop than the 1.6 million b/d forecast last month. The agency now expects the Strait of Hormuz to remain closed to shipping throughout 2026 due to the stalled US‑Iran negotiations, and anticipates only a modest 2.6 million b/d recovery in 2027, leaving demand barely above 2025 levels. Brent crude surged to nearly $110 a barrel this week before retreating to about $105, driven by escalating conflict over the Strait of Hormuz and Houthi advances on the Bab al‑Mandeb Strait.

Record diesel prices and constrained refining capacity — worsened by Ukrainian strikes on Russian refineries — are further eroding demand. Global oil production fell 1.6 million b/d in August to just over 100 million b/d, with more than 10 million b/d of Gulf output still shut in. The IEA has released 320 million barrels of its planned 400 million barrel strategic reserve release, but the pace has slowed to a trickle of 20 million barrels in August.