Global oil demand is recovering after months of Middle East disruptions, but a flare-up in U.S.-Iran hostilities has injected fresh uncertainty just as markets braced for a supply surge next year, the International Energy Agency said. Consumption is projected to decline by 1 million barrels a day in 2024, though the pace of contraction is easing sharply from a 4.8 million barrels a day drop in the second quarter and a forecast 1.7 million barrels a day decline in the third.

Demand is expected to return to growth in the final three months, rising by 1.2 million barrels a day — a turning point for a market that spent much of the year fearing war could remove millions of barrels from global supplies. The Paris-based watchdog now sees demand increasing by 1.9 million barrels a day in 2027.

That rebound, however, risks being overwhelmed by a supply wave. The IEA forecasts global supply will surge by around 7.5 million barrels a day by 2027, setting up a potential surplus that the latest escalation could either deepen or disrupt depending on whether Iranian output is curtailed.