US-Iran escalation threatens oil supply recovery, warns IEA | US-Israel war on Iran News
Return of US-Iran Hostilities Could Exacerbate Global Energy Crisis, IEA Warns
The International Energy Agency (IEA) has cautioned that renewed fighting between the United States and Iran may prolong the ongoing global energy crisis. The warning was issued on Friday as the agency expressed concerns that a resurgence of hostilities could hinder the recovery of energy markets.
Despite a temporary decrease in military actions from both sides, sources indicated that the U.S. military remains poised to resume attacks if necessary. This cautious optimism for diplomacy comes amid ongoing tensions in the Middle East.
In its latest monthly oil market report, the IEA noted that world oil demand is poised to decline this year for the first time since 2020, largely due to the disruptions in production and exports stemming from regional conflict. Following a U.S.-Iran memorandum of understanding (MoU) last month that appeared to promote a recovery, the IEA warned that escalating violence could complicate this positive trend.
Recent clashes were ignited by differing interpretations of the MoU’s provisions concerning the strategically significant Strait of Hormuz. Before hostilities reignited in April, this vital waterway was responsible for transporting approximately one-fifth of global oil and liquefied natural gas exports.
The agency reported that recent actions have effectively closed off the Strait, resulting in a loss of up to 14 million barrels per day (bpd) in crude oil flow. This decline in supply has contributed to rising fuel prices, impacting the global economy.
In June, following the initial agreement and a temporary reopening of the strait, global oil supply increased by 4.1 million bpd, although it remained 9.4 million bpd below pre-war levels. The IEA had initially projected a surplus in global oil supply of 4.62 million bpd by 2027, assuming the strait would fully reopen, contrasting with a forecasted deficit of 860,000 bpd for 2026. However, with renewed hostilities, shipping through the Strait has come to a standstill.
Despite these developments, oil prices remained relatively stable. Brent crude was trading at $76.37 a barrel in early Friday trading, reflecting a modest increase of more than $4 from the previous week.
Market analysts suggested that the prevailing calm might indicate confidence in diplomatic efforts to stabilize the situation, even as declining inventories suggest further upward pressure on prices in the near future. Reports indicated that a lull in attacks earlier this week was the result of ongoing diplomatic negotiations aimed at reinstating a ceasefire.
Sources have revealed that Pakistan and Qatar are attempting to facilitate dialogue between the U.S. and Iran. Meanwhile, oil-producing nations in the Middle East, some of which have faced Iranian attacks recently, have urged for restraint in order to prevent further escalation.
Egypt and Gulf states engaged in discussions on Friday, calling for all parties to ease tensions and avert a wider conflict. Their statements follow a series of Iranian strikes on Bahrain, Kuwait, and Jordan. The Gulf Cooperation Council and its member states have consistently urged both Washington and Tehran to protect the diplomatic progress achieved under the recent MoU.
The United Nations has also expressed alarm regarding the renewed violence, warning that further escalation could jeopardize diplomatic efforts and have dire repercussions for both the region and the global economy.
The IEA’s forecasts hinge on the assumption that a ceasefire will hold and that traffic through the Strait of Hormuz will gradually resume. If these conditions do not materialize, the agency’s outlook for global oil supply and demand could face significant challenges.
