Global oil supply forecast slashed due to Iran war and Strait of Hormuz closure

Global oil supply forecasts have been substantially revised downward by the International Energy Agency (IEA) for the rest of 2026. The agency cites the resumption of hostilities between the United States and Iran in July as the primary reason, which has severely hampered circulation through the critical Strait of Hormuz.

In its monthly oil market report, the IEA also reduced its projections for oil and petroleum product demand this year. This adjustment reflects the impact of the ongoing crisis on consumers, exacerbated by the repeated closures of the Strait of Hormuz and the subsequent rise in crude oil prices. Global oil reserves have reportedly decreased by 69 million barrels in July, falling below 7,900 million barrels for the first time since April 2025, underscoring the urgency to reopen the strategic passage.

While oil production in Persian Gulf countries increased in July following a ceasefire agreement, new attacks have effectively paralyzed traffic through the Strait of Hormuz. This has led to a significant cut in exports from the region. Consequently, the IEA has lowered its global supply outlook for the third quarter by 1.7 million barrels per day compared to its previous month's estimate.

Overall, the market is expected to face a deficit of 1.8 million barrels per day in the third quarter, more than double the IEA's earlier calculation. Although the agency anticipates a market rebalancing by the end of 2026, with supply expected to increase significantly in 2027, the risks remain substantial. The sharp decline in global reserves heightens the urgency for the immediate reopening of the Strait of Hormuz.