According to the IEA, global oil supply this year will be below total demand, as the Iran conflict severely disrupts oil production in the Middle East and forces countries to draw on strategic reserves at an unprecedented pace. This assessment marks a reversal from the IEA's earlier forecast, when the agency had said the oil
market would be oversupplied this year. In its monthly report released on Wednesday (May 13), the IEA noted that the war between the United States and Israel with Iran, damage to Iran's oil and gas infrastructure and those of Gulf neighbors, and the near-paralysis of flows through the Hormuz Strait have caused the largest oil-supply shock in history. This shock has pushed oil prices higher. Against the backdrop of global oil inventories shrinking at an unprecedented rate, the agency warned that prices will rise sharply in the near term. According to IEA data, crude oil and refined product inventories fell by nearly 4 million barrels per day in April — a drop larger than total oil consumption in the United Kingdom and Germany combined. This downward trend is eroding the stockpiles that countries typically rely on to cope with supply shocks. “Importing countries are drawing oil from strategic reserves at an unprecedented rate, in a context where Middle East supply disruptions are severe as never before. Spare oil stocks are falling quickly while supply remains disrupted. This could signal further price increases in the near term,” the IEA said in the report followed closely by markets. This warning raises concerns that inventories of some fuel types could fall to very low levels in the summer, forcing consumers to compete more fiercely for a tighter supply. According to the IEA, global oil stocks have fallen by nearly 250 million barrels since the start of the Iran conflict. The actual decline could be larger if the amount of oil stuck in the Gulf is excluded, given that flows through the Hormuz Strait have been nearly paralyzed. IEA notes that Gulf region supply shortfalls have been partly offset by weaker demand in many places, including developed economies. In Europe, oil demand this year is expected to fall by 140,000 barrels per day. This would be the largest drop since Russia began its military operation in Ukraine. The forecast assumes the Iran conflict ends in early June. If the conflict lasts longer, Europe may need to cut consumption more deeply. All oil-importing countries are affected as flows through the Hormuz Strait have been almost paralyzed for over 10 weeks due to the risk of Iran attacking merchant ships. This is a key shipping lane, typically transporting about one-fifth of global oil consumption each day. The decline in flows from the Middle East has caused the largest oil-supply shock in history. Oil demand has fallen in many countries, especially in Asia—the region that absorbs most of Middle Eastern oil. In Europe, aviation fuels are among the oil products under the greatest pressure. In 2025, the Middle East accounted for about 60% of aviation fuel in the region. According to the IEA, Europe
0s net imports of aviation fuels in April fell by nearly 100,000 barrels per day versus the same period in 2025, causing stocks at the Amsterdam-Rotterdam-Antwerp hub to drop to their lowest in five years. Nevertheless, the impact of reduced supply is partly offset by higher exports from North America, notably the United States. The IEA notes that the U.S. has increased exports of diesel by 430,000 barrels per day compared with 2025 and redirected 80% of this volume to Europe.
