A day after the International Energy Agency (IEA) announced a coordinated release of 400 million barrels from emergency reserves, it warned that global oil demand could fall by around 1 million barrels per day due to the disruption caused by the war in Iran.
“The war is creating the largest supply shock in the history of the oil market,” the IEA said in its latest Oil Market Report. Flight cancellations, grounded airlines, reduced travel, and slowdowns in industrial activity across countries are expected to curtail consumption through March and April.
Global oil consumption is now expected to rise by 640,000 barrels per day in 2026, a downgrade of 210,000 barrels from last month’s forecast. Analysts warn that the combination of higher prices and geopolitical risk could further temper demand and unsettle markets.
Yet, the price of Brent Crude is back above $100 a barrel, and gasoline prices hit a four-year high as the war in Iran entered its 13th day.
That’s because, even after the war stops, it may take weeks or months for energy supplies to normalise, according to the IEA.
“Flow rate is what matters. The maximum sustainable flow rate is 2 million barrels per day. It will take them 200 days to get that out,” Jeff Currie, Chief Strategy Officer of Energy Pathways at Carlyle Group, told Bloomberg on Wednesday.
No wonder, then, crude oil price estimates remain high. Bank of America expects the price of crude oil to average about $80 a barrel through June 2026. Citi expects oil prices to remain in the $80-$90 range.
Barclays has projected a 10% chance that oil prices could surge to $150 a barrel by the end of March.
The blockade in the Strait of Hormuz, a key artery for global crude flows, is an important reason. Shipments have plunged from 20 million barrels per day pre-war to a trickle.
Gulf countries have cut production by at least 10 million barrels per day, while attacks and logistical bottlenecks have shuttered more than 3 million barrels per day of refining capacity.
Some of the shortfall is offset by increased output from Kazakhstan, Russia, and other non-OPEC+ producers. Still, the report cautions that it may take months for affected producers to return to pre-crisis levels.
Global oil supply is projected to drop by 8 million barrels per day in March.
Refined product exports from the Gulf, including 3.3 million barrels per day of fuels and 1.5 million barrels of LPG in 2025, have been sharply curtailed, further tightening global markets.
“The disruptions are unprecedented. The combination of reduced supply, logistical bottlenecks, and flight cancellations is weighing on both demand and the broader economy,” the IEA said.
