<p>War in the Middle East has triggered a blockade of the Strait of Hormuz, prompting the International Energy Agency (IEA) to significantly downgrade its supply and demand forecasts, leaving global refineries at risk of supply cuts.</p>
<p>On Tuesday, the International Energy Agency (IEA) released its monthly oil market report, <strong>downgrading the 2026 global oil demand forecast from an increase of 640,000 barrels per day to a contraction of 80,000 barrels per day, marking the first annual decline in global oil demand since the onset of the COVID-19 pandemic in 2020.</strong> IEA Executive Director Fatih Birol stated on Monday that current crude oil futures prices have yet to reflect the severity of this crisis, but that situation is set to change soon.</p>
<p>In the same report, the IEA drastically revised down its 2026 global oil supply forecast from an increase of 1.1 million barrels per day to a decrease of 1.5 million barrels per day. The agency characterized this supply shock as the largest oil supply disruption in history and warned, &#34;As supply shortages and high prices persist, demand destruction will further spread.&#34;</p>
<p>As a result, London crude oil futures prices have risen to near $100 per barrel. However, according to the agency's report, the &#34;disconnect&#34; between the futures market and the physical market is becoming increasingly severe.</p>
<h2>Strait of Hormuz Flow Nearly Ceases, Historic Supply Gap Emerges</h2>
<p>The core of this crisis lies in the large-scale blockade of the Strait of Hormuz. IEA data shows that <strong>in early April, crude oil, fuel, and liquefied natural gas transport volumes through the Strait of Hormuz fell to 3.8 million barrels per day, a drop of over 80% from pre-crisis levels exceeding 20 million barrels per day, with the strait previously accounting for approximately 20% of global oil supply.</strong></p>
<p>Reports indicate that global oil supply alone lost 1.01 million barrels per day in March, a decline of about 9%. Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait were forced to significantly cut production. Meanwhile, measures announced by the Trump administration to block ships entering and exiting Iranian ports are scheduled to officially take effect on Monday, further exacerbating supply pressures.</p>
<h2>Demand Side Hit First, Asian Petrochemical Industry Plunges into Chaos</h2>
<p>The IEA report points out that petrochemical feedstocks are most directly impacted by the war—the blockade of the Strait of Hormuz has led to a complete disorder in supply chains to Asia. Currently, the regions with the deepest demand declines are the Middle East and the Asia-Pacific region.</p>
<p><strong>At the refinery level, the IEA significantly downgraded its crude processing volume forecast:</strong> Global crude processing in April is expected to be 77.2 million barrels per day, 5.8 million barrels lower than the agency's February forecast and a year-on-year decline of 5.2 million barrels. Forecast reductions span the entire year, with the second quarter forecast downgraded by 2.5 million barrels per day and the full-year 2026 forecast downgraded by 950,000 barrels per day. Additionally, due to escalating attacks on energy infrastructure, Russia's April refinery data forecast was also revised downward.</p>
<p>The IEA explicitly stated in its monthly report: &#34;Many refineries in Asia still face extremely fragile crude oil supply options.&#34; The agency also noted that if navigation conditions through the Strait of Hormuz begin to recover gradually from May, some Asian refineries may avoid supply cutoffs.</p>
<h2>Record Emergency Reserve Releases Widen Futures-Spot Price Divergence</h2>
<p>Facing spiraling energy costs, the IEA coordinated member countries—including the United States, Japan, and Germany—to release a record 400 million barrels of crude oil from strategic petroleum reserves last month in an attempt to curb prices.</p>
<p>However, market pricing signals remain significantly distorted. Despite abnormal spikes in crude oil futures in March, London prices currently hover below $100 per barrel, and the divergence from physical market prices continues to widen. The IEA report refers to this phenomenon as a &#34;disconnect&#34; and believes its severity is intensifying. Fatih Birol publicly stated on Monday that futures prices have not yet fully reflected the true severity of the crisis.</p>
<h2>Medium-Term Scenario Holds Major Uncertainties</h2>
<p>The IEA baseline scenario assumes that oil flows in the Middle East will largely return to normal before mid-year, but the report simultaneously presents stress scenarios where supply disruptions continue for longer periods.</p>
<p><strong>&#34;In this scenario, global energy markets and national economies need to prepare for major shocks over the coming months,&#34;</strong> the IEA warned.</p>
<p>Regarding supply-demand balance, the IEA expects global oil supply to exceed demand by 410,000 barrels per day in 2026, compared to a surplus forecast of 2.46 million barrels per day in the previous report—meaning the market's comfortable surplus has narrowed significantly. The IEA emphasized that restoring normal navigation through the Strait of Hormuz is the most critical variable for alleviating global energy supply tightness and price pressures.</p>

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<p>The IEA's April monthly report indicates that global oil demand will contract in 2026 for the first time since 2020. Shipping volumes through the Strait of Hormuz plummeted by 80%, leading to a downward revision of global daily supply by 1.5 million barrels, classified as the largest supply disruption in history. Asian refineries face extreme vulnerability; if navigation through the strait does not resume in May, the global economy faces deeper demand destruction and energy shocks</p>

- The ongoing conflict in the Middle East has led to the blockade of the Strait of Hormuz, severely impacting global oil supply and prompting the International Energy Agency (IEA) to revise its demand forecast for 2026 down from an increase of 640,000 barrels per day to a decline of 80,000 barrels per day.  
- The IEA also significantly reduced its supply forecast, expecting a decrease of 1.5 million barrels per day instead of an increase, marking the largest oil supply disruption in history.  
- Oil prices have surged close to $100 per barrel, causing severe disruptions, especially in the Asian petrochemical supply chain, as the demand declines most sharply in the Middle East and Asia-Pacific regions.

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IEA Drastically Revises Down 2026 Global Oil Outlook: Demand Contracts for First Time in Six Years, Supply Faces Historic Disruption