'Sharpest drop since Covid': IEA warns oil demand to fall by 80,000 b/d as Iran war disrupts global markets
Global oil inventories fell by 85 million barrels in March, with steep drawdowns outside West Asia even as floating storage within the region increased due to blocked export routes.
- Apr 14, 2026,
- Updated Apr 14, 2026 3:58 PM IST
Global oil demand is set to contract this year as the Iran war disrupts supply and trade, the International Energy Agency (IEA) said, warning of the sharpest downturn since the Covid-19 pandemic.
Must Read: What explains India’s Energy Insecurity
"Oil demand is expected to contract by 80 kb/d this year, as the Iran war upends our global outlook. This is 730 kb/d less than in last month’s Report, and a forecast 1.5 mb/d 2Q26 decline would be the sharpest since Covid-19 slashed fuel consumption," the agency said in its latest Oil Market Report.
The report said global oil supply plunged by 10.1 million barrels per day in March to 97 mb/d, describing it as the largest disruption in history. The fall was driven by continued attacks on energy infrastructure in West Asia and restrictions on tanker movements through the Strait of Hormuz.
Output from OPEC+ dropped sharply, while non-OPEC+ supply also declined amid disruptions.
Must Read: 'No clear direction of...': 14 ships cross Strait of Hormuz since US blockade
Refining activity has also taken a hit, with crude throughputs struggling due to feedstock shortages and infrastructure damage. Refineries in West Asia and Asia have cut runs significantly, tightening global product markets and pushing margins higher.
At the same time, global oil inventories fell by 85 million barrels in March, with steep drawdowns outside West Asia even as floating storage within the region increased due to blocked export routes.
Oil prices surged in response to the supply shock, recording their largest-ever monthly gain in March.
Benchmark crude prices rose to around $130 per barrel, far above pre-conflict levels, while physical crude prices briefly approached $150 as refiners scrambled to secure supplies, the agency said, adding that refined products saw even sharper increases, reflecting severe constraints in supply.
The disruption to shipping through the Strait of Hormuz has been central to the crisis. Flows through the vital waterway dropped sharply in early April, with shipments falling to a fraction of pre-conflict levels. Although alternative export routes have partially compensated, the overall loss in oil exports remains significant, with cumulative supply disruptions running into hundreds of millions of barrels.
The impact has begun to spread to demand, particularly in the Middle East and Asia Pacific, where shortages and rising prices have hit consumption of naphtha, LPG, and jet fuel. Flight cancellations and reduced industrial activity have further weighed on fuel use, with global demand estimated to have fallen sharply in recent months.
The IEA said the outlook remains highly uncertain and hinges on whether shipping through the Strait of Hormuz can return to normal. It assumes some recovery in flows by mid-year, though not to pre-conflict levels, but warned that a prolonged conflict could lead to "significant disruptions" for global energy markets and the wider economy.
Global oil demand is set to contract this year as the Iran war disrupts supply and trade, the International Energy Agency (IEA) said, warning of the sharpest downturn since the Covid-19 pandemic.
Must Read: What explains India’s Energy Insecurity
"Oil demand is expected to contract by 80 kb/d this year, as the Iran war upends our global outlook. This is 730 kb/d less than in last month’s Report, and a forecast 1.5 mb/d 2Q26 decline would be the sharpest since Covid-19 slashed fuel consumption," the agency said in its latest Oil Market Report.
The report said global oil supply plunged by 10.1 million barrels per day in March to 97 mb/d, describing it as the largest disruption in history. The fall was driven by continued attacks on energy infrastructure in West Asia and restrictions on tanker movements through the Strait of Hormuz.
Output from OPEC+ dropped sharply, while non-OPEC+ supply also declined amid disruptions.
Must Read: 'No clear direction of...': 14 ships cross Strait of Hormuz since US blockade
Refining activity has also taken a hit, with crude throughputs struggling due to feedstock shortages and infrastructure damage. Refineries in West Asia and Asia have cut runs significantly, tightening global product markets and pushing margins higher.
At the same time, global oil inventories fell by 85 million barrels in March, with steep drawdowns outside West Asia even as floating storage within the region increased due to blocked export routes.
Oil prices surged in response to the supply shock, recording their largest-ever monthly gain in March.
Benchmark crude prices rose to around $130 per barrel, far above pre-conflict levels, while physical crude prices briefly approached $150 as refiners scrambled to secure supplies, the agency said, adding that refined products saw even sharper increases, reflecting severe constraints in supply.
The disruption to shipping through the Strait of Hormuz has been central to the crisis. Flows through the vital waterway dropped sharply in early April, with shipments falling to a fraction of pre-conflict levels. Although alternative export routes have partially compensated, the overall loss in oil exports remains significant, with cumulative supply disruptions running into hundreds of millions of barrels.
The impact has begun to spread to demand, particularly in the Middle East and Asia Pacific, where shortages and rising prices have hit consumption of naphtha, LPG, and jet fuel. Flight cancellations and reduced industrial activity have further weighed on fuel use, with global demand estimated to have fallen sharply in recent months.
The IEA said the outlook remains highly uncertain and hinges on whether shipping through the Strait of Hormuz can return to normal. It assumes some recovery in flows by mid-year, though not to pre-conflict levels, but warned that a prolonged conflict could lead to "significant disruptions" for global energy markets and the wider economy.