Global Oil Demand to Decline in 2026 as Middle East Supply Shock Reshapes Market

Rabat – Global oil demand will decline in 2026 for the first time since 2020, as shortages and higher prices linked to war in the Middle East reshape energy markets, the International Energy Agency (IEA) said.

The agency described the situation as the most severe oil supply shock on record.

The last annual drop in demand took place in 2020, when pandemic lockdowns and border closures cut global use by 8.97 million barrels per day. Since then, demand returned to steady growth.

Six years later, the trend may reverse. The IEA puts global demand at 104.26 million barrels per day in 2026, just below the 104.34 million barrels per day expected in 2025.

In its monthly oil market report, the agency projects a small average decline of 80,000 barrels per day in 2026, a sharp change from last month’s estimate of 730,000 barrels per day growth.

The second quarter may see a drop of 1.5 million barrels per day, the steepest contraction since the pandemic period.

The agency says early pressure appeared first in the Middle East and Asia-Pacific region. Jet fuel demand and liquefied petroleum gas use weakened first, especially in aviation and household energy use. Strain on supply and prices now extends across wider markets.

Stocks did not cover the shortfall. As a result, demand weakened in several sectors. Asian petrochemical producers reduced output due to limited feedstock availability, airlines cancelled flights on some routes, and several countries adopted fuel-saving measures.

IEA’s executive director, Fatih Birol, said April may prove more difficult than March for global energy markets, even if a rapid end to the Iran conflict occurs.

Key flows through the Strait of Hormuz remain central to market stability.

The agency says partial recovery of Middle East oil and gas exports may take place by mid-year, although a return to pre-conflict levels appears unlikely.

It presents two scenarios, a baseline case with partial recovery and a second case with prolonged conflict that deepens disruption. 

In the second case, governments may need deliberate demand cuts to prevent further economic strain.

Meanwhile, Russia gained from the situation. Oil export revenue doubled between February and March, from 9.7 billion dollars to 19 billion dollars, due to higher prices and larger shipments to India after changes in United States sanctions rules on certain cargoes.