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IEA: Oil markets under growing strain as Middle East supply disruptions persist – EnviroNews
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Global oil markets are facing renewed upward price pressures as continued disruptions to Middle East exports deepen concerns over the ability of supply to meet demand, according to the International Energy Agency (IEA).
In an analysis published on Friday, September 18, 2026, by Toril Bosoni, Head of the IEA’s Oil Industry and Markets Division, the agency warned that if Gulf oil supplies remain constrained in the coming months while commercial inventories continue to fall rapidly, higher prices and further reductions in oil demand may be needed to close the widening supply-demand gap.
Oil prices had eased from their April peaks in the months following the outbreak of the conflict as several factors helped cushion the impact of lost Middle East supplies. These included releases from emergency IEA stocks, increased exports through routes bypassing the Strait of Hormuz, higher production from countries outside the region and a slowdown in global oil demand.
However, renewed hostilities have disrupted regional exports again, putting fresh pressure on crude and oil-product prices.
Hormuz flows remain sharply below pre-war levels
Six months after the start of the Middle East conflict, oil production and exports from the Gulf remain heavily restricted.
According to the IEA, oil flows through the Strait of Hormuz averaged just 7.6 million barrels per day (mb/d) in August, about 13.1 mb/d below pre-war levels. Cumulative export losses through the strategic waterway have approached 2.8 billion barrels.
Despite the scale of the disruption, the actual supply deficit has been considerably smaller because several factors have helped compensate for the lost volumes.
IEA balances indicate a deficit of around 2.2 mb/d in the second quarter of 2026 and 1.7 mb/d in the third quarter, well below the headline loss of flows through the Strait.
The oil market entered the crisis with substantial spare supply. Global oil supply exceeded demand by an average of 1.4 mb/d in 2025 as OPEC+ producers gradually unwound earlier production cuts. The surplus exceeded 2 mb/d during the second half of last year, resulting in significant inventory accumulation, particularly in China.
Bypass routes provide temporary relief
Saudi Arabia and the United Arab Emirates moved quickly to redirect available crude through routes that bypass the Strait of Hormuz after shipping through the waterway was disrupted.
Exports from Saudi Arabia’s Red Sea port of Yanbu and the UAE’s Gulf of Oman port of Fujairah increased from 4.1 mb/d in February to a peak of 7.8 mb/d in June.
However, attacks in the Red Sea subsequently reduced those flows to 5.5 mb/d in August. The IEA estimates that the bypass routes have offset more than 500 million barrels of lost supply from the Strait, equivalent to about 2.8 mb/d.
The situation deteriorated further in early September when attacks on the Saudi East-West pipeline carrying crude to Yanbu resulted in its shutdown, further limiting the capacity of the bypass system.
At the same time, oil exports through the Strait of Hormuz have shown some signs of recovery, with US military support facilitating some transits. Nevertheless, flows remain significantly below their pre-war levels.
Non-Gulf producers increase output
Oil producers outside the Gulf have also helped cushion the supply shock.
The IEA estimates that non-Gulf producers have added a cumulative 420 million barrels, equivalent to approximately 2.3 mb/d of additional oil supply, since the beginning of the conflict.
Between February and August, the largest production increases came from the United States, which added about 520,000 barrels per day, followed by Brazil with 470,000 barrels per day, Kazakhstan with 440,000 barrels per day, Venezuela with 300,000 barrels per day and Nigeria with 200,000 barrels per day.
Global biofuels production also increased seasonally by about 890,000 barrels per day over the same period.
The additional output has helped limit the size of the global supply deficit, although the IEA cautioned that these measures have not fully replaced the volumes lost from the Gulf.
Oil demand records sharp decline
The supply shock has been accompanied by a substantial reduction in global oil consumption as high prices, fuel shortages and government conservation measures weigh on demand.
The IEA estimates that global oil demand during the past six months has averaged 5.8 mb/d below its February level, representing a cumulative reduction of more than one billion barrels.
China has recorded the largest decline. Chinese oil imports, refinery activity and product deliveries have fallen significantly, with apparent demand over the past six months running 1.7 mb/d below February levels and 1.1 mb/d below the corresponding period a year earlier.
Chinese seaborne crude imports fell from 11.5 mb/d in February to just 6 mb/d in June, easing pressure on other crude importers in Asia.
Demand has also fallen in the Middle East, where restrictions on petrochemical operations and aviation have reduced consumption. Some Asian governments have introduced fuel rationing and emergency conservation measures, while shortages and higher prices have reduced consumption elsewhere.
Global oil demand declined by 5.3 mb/d year-on-year in the second quarter of 2026, marking the first quarterly decline since the Covid-19 pandemic.
Gasoil accounted for a significant portion of the reduction, falling by 1.2 mb/d year-on-year, while combined deliveries of naphtha, liquefied petroleum gas (LPG) and ethane declined by 1.8 mb/d.
For the full year, the IEA now expects global oil demand to contract by 2.5 mb/d, with the Middle East and Asia accounting for about 80 per cent of the decline.
Global oil inventories under pressure
Despite the combination of additional production and weaker consumption, global oil inventories have been declining at an unprecedented rate.
The IEA estimates that global oil inventories have fallen by an average of 2.8 mb/d over the past six months. Observed oil stocks are now about 507 million barrels below their level at the beginning of the conflict.
IEA member countries have released more than 300 million barrels from emergency reserves as part of the collective action announced on March 11.
Non-OECD crude oil inventories account for 105 million barrels of the decline, with around 65 per cent of that reduction coming from above-ground storage in China. The remainder has largely resulted from lower volumes of oil in transit.
The rapid depletion of inventories is increasing the pressure on governments and producers to restore disrupted supply routes.
The IEA warned that the urgency of fully reopening the Strait of Hormuz and the alternative bypass routes is growing as available inventory buffers shrink.
“Any further disruptions that prevent a full recovery in production and exports will have major impacts on markets across the world,” the agency said.
The latest assessment underscores the vulnerability of global oil markets to prolonged disruptions in the Middle East. While increased production outside the Gulf, alternative export routes, emergency stock releases and lower demand have so far absorbed much of the supply shock, the IEA’s analysis indicates that these buffers are being rapidly depleted.
With commercial inventories falling and Gulf exports still well below pre-war levels, the trajectory of oil prices will increasingly depend on how quickly regional production and export infrastructure can recover and whether disruptions to key shipping routes persist.
