West Asia Crisis: Global oil demand to fall by 80,000 barrels per day 2026 on Iran war, IEA says

The International Energy Agency (IEA) has significantly lowered its projections for global oil supply and demand growth, noting both will decline from last year’s levels as the US-Israel conflict with Iran disrupts oil flows and pressures the global economy.

In its report released on Tuesday, the IEA said global oil demand is expected to decline by 80,000 barrels per day this year, compared to an earlier forecast of a 640,000 bpd increase.

The outlook came after the IMF, World Bank, and IEA on Monday urged countries to refrain from hoarding energy supplies or imposing export restrictions that could deepen the crisis.

IEA chief Fatih Birol said on Monday that several countries were hoarding energy stocks and imposing export restrictions, urging all nations to allow supplies to flow freely into the market, without naming them.

"Demand destruction will spread as scarcity and higher prices persist," the IEA report said on Tuesday, adding that the sharpest declines in oil consumption so far have been seen in the Middle East and Asia Pacific, particularly for naphtha, LPG and jet fuel.

The Paris-based agency said a projected 1.5 million bpd decline in demand in the second quarter would be the steepest contraction since the COVID-19 pandemic. On Monday, OPEC trimmed its forecast for global oil demand in the second quarter while leaving its full-year outlook unchanged.

The estimates came after a US delegation led by Vice President JD Vance and an Iranian delegation led by Iranian Parliament Speaker Mohammad-Bagher Ghalibaf held a marathon session in Islamabad, on April 11, to find a peaceful resolution of a conflict that started on February 28. The US and Iran failed to reach an agreement.

On Monday, Prime Minister Shehbaz reaffirmed Pakistan's commitment to playing a key role in promoting lasting peace in the region, while expressing hope that the recent direct talks between the US and Iran would yield positive results, reported PTI.

Chairing an emergency meeting of the cabinet, the prime minister voiced satisfaction over progress in the negotiations and said Pakistan remained optimistic about a constructive outcome. The prime minister said the Islamabad talks helped dispel the clouds of war hovering over the region and created prospects for peace amid global economic uncertainty.

He added that throughout history, agreements such as the Oslo Accords, Geneva Accords and Good Friday Agreement had taken years to materialise, but Pakistan's efforts facilitated a breakthrough dialogue between two adversaries, according to PTI.

The federal cabinet on Monday also unanimously passed a resolution to pay tribute to the country's leadership for bringing the two sides together and ending nearly half a century of deadlock, and expressed hope that these sincere efforts would lead to lasting peace worldwide.