In its latest Oil Market Report, the IEA said cumulative supply losses from Gulf producers have already exceeded 1bn barrels, while significant volumes of oil production remain offline with tanker traffic through the Strait of Hormuz still heavily restricted.

Benchmark crude prices have swung sharply amid continued uncertainty over whether the US and Iran will reach an agreement to reopen the Strait and end the conflict. According to the IEA, North Sea Dated crude rose to a peak of $144.68/b in early April before easing back towards $111/b by month-end.

Despite the scale of disruption, the immediate supply-demand gap has been partly contained because the market entered the crisis in surplus and because both producers and consumers have adjusted rapidly to changing conditions.

Saudi Arabia and the United Arab Emirates have redirected some exports to terminals outside the Strait, while emergency stock releases and higher output from producers outside the Middle East have helped offset part of the losses. Observed global inventories, including oil in transit, have continued to fall as consuming countries draw on strategic and commercial reserves.

Supply growth expectations from producers in the Americas have also been revised higher, while Atlantic Basin crude exports have increased sharply since February as suppliers attempt to compensate for reduced Gulf flows. Additional shipments from the US, Brazil, Canada, Kazakhstan and Venezuela are increasingly being redirected towards Asian markets.

At the same time, higher prices and supply constraints are reducing demand and refinery activity across several major markets.

Global oil demand is now forecast to contract in 2026, with the IEA expecting the sharpest decline during the second quarter as higher prices, weaker economic conditions and demand-saving measures impact consumption.

Petrochemical feedstocks and jet fuel have been among the most heavily affected product segments following the loss of Gulf exports. Chinese crude imports have fallen sharply since February, while major import reductions have also been recorded in Japan, Korea and India as refiners scaled back activity.

The slowdown in global refinery activity has temporarily eased pressure in crude markets. However, the IEA warned supply pressures are increasingly spreading into refined product markets instead.

Even under the IEA’s ‘base case’ assumption that the conflict ends by early June and flows through Hormuz gradually resume during the third quarter, the agency expects supply to remain below demand through most of 2026.

Its latest estimates suggest the cumulative oil deficit will continue widening through the summer despite coordinated emergency stock releases. Rebuilding depleted strategic and commercial inventories could require several years of additional supply growth on top of underlying demand recovery.

While higher refinery output later in the year could ease some pressure in refined fuel markets, the report suggests the effects of the Hormuz disruption are likely to continue shaping global oil supply and demand well beyond the immediate crisis period.