Global oil demand to plunge amid disruptions caused by war on Iran: IEA

The International Energy Agency (IEA) has issued a stark warning regarding the global oil market, drastically revising its forecasts downward. Citing the ongoing "war on Iran" and its ripple effects on the global economy, the IEA now predicts a contraction in global oil demand for the first time in years. This revised outlook signals a significant shift from previous expectations of modest growth, highlighting the profound impact of geopolitical tensions on energy markets.

According to the IEA's latest report, global oil demand is projected to decrease by 80,000 barrels per day in the current year. This stands in sharp contrast to earlier predictions of a 640,000 barrels per day increase. The agency attributes this "demand destruction" to persistent scarcity and elevated prices, with the most pronounced cuts observed in the Middle East and Asia Pacific regions, particularly for naphtha, LPG, and jet fuel. The second quarter of this year is expected to witness the deepest contraction in oil consumption since the COVID-19 pandemic, underscoring the severity of the current downturn.

The report further emphasizes the unprecedented scale of supply disruptions stemming from the conflict in the Middle East. Iran's decision to close the Strait of Hormuz, a critical chokepoint for global energy shipments, has led to the largest oil supply disruption in history, with 10.1 million barrels per day lost in March alone. This disruption, coupled with U.S. President Donald Trump's announcement of a blockade on Iranian ports, has sent gas and petrol prices soaring worldwide and cast a long shadow over global energy security. The IEA's findings underscore the fragility of the current energy landscape and the far-reaching consequences of geopolitical instability.

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Demand destruction will spread as scarcity and higher prices persist.