The International Energy Agency (IEA) says that global oil demand is set to decline this year for the first time since 2020.
The Iran war has wreaked havoc with crude oil production and exports in the Middle East, leading world oil demand to decline by one million barrels per day, says the IEA.
If the forecast holds, it would mark the first annual decrease since the height of the Covid-19 pandemic in 2020, according to the IEA’s latest oil market report.
Demand for oil has been hurt by the closure of the Strait of Hormuz waterway near Iran, where 20% of the world’s crude is typically shipped.
The IEA notes in its report that a recovery in oil markets is underway, though it warned that renewed escalation in the conflict between the U.S. and Iran could complicate its outlook.
The IEA said that its demand forecast assumes a permanent ceasefire and the gradual reopening of the Strait of Hormuz.
“Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalization in oil markets,” writes the IEA.
Brent crude oil, the international benchmark, is currently trading at $76.67 U.S. per barrel, having gained 7% this past week as the U.S. and Iran again exchange missile fire.
