Global oil demand experienced its steepest quarterly contraction outside the Covid-19 pandemic era, according to the International Energy Agency (IEA) released Tuesday. Soaring prices, supply constraints, and the near-total grounding of Middle East air traffic precipitated this sharp reduction. The speed and severity of this demand destruction worry energy market participants globally.

Demand fell 3.4 percent in March, with the IEA forecasting an additional 1.1 percent drop in April, pushing consumption to 100.4mn barrels a day. This level marks the lowest reading in over three years. The situation hinges on the reopening of the Strait of Hormuz, which usually carries one-fifth of global supply and has been effectively shut since late February.

Western nations must prepare for shortages to intensify as scarcity continues, the agency warned, noting that initial drops centered on Asia and the Middle East. The conflict has already taken approximately 13mn b/d offline. To mitigate the immediate deficit, the IEA helped coordinate a record 400mn barrel strategic reserve release.

Yearly projections have been severely curtailed; 2026 demand is now expected to mark the first annual decline, excluding 2009, since the Great Depression aftermath. Before the conflict, the expected 2026 supply surplus was projected at 2.4mn b/d; that estimate has shrunk to fewer than 500,000 b/d.