Over ten weeks into the Middle East conflict, worldwide oil stocks are shrinking at an unprecedented rate due to ongoing interruptions in Strait of Hormuz shipments, according to the International Energy Agency (IEA) on Wednesday.

IEA preliminary figures show global oil inventories declined by 129 million barrels in March and another 117 million barrels in April, triggered by US and Israeli actions against Iran that hampered Gulf exports.

OECD nations saw the steepest drops, with on-land stocks falling 146 million barrels. Non-OECD visible inventories decreased by 24 million barrels.

The IEA noted that total crude supply shortfalls from Gulf producers have surpassed one billion barrels, with over 14 million barrels per day blocked from exiting the area - terming it an 'unprecedented supply shock'.

In March, the agency announced the release of 400 million barrels from member emergency reserves to stabilize markets, with about 164 million barrels already tapped.

Oil prices have fluctuated wildly amid doubts over US-Iran talks to reopen the Strait and resolve the war.

North Sea Dated crude, a key near-term physical benchmark, fell from a high of $144 per barrel to under $100 before rebounding.

Meanwhile, producers are mitigating global effects: Saudi Arabia and the United Arab Emirates have diverted some exports via alternative terminals beyond the Strait, and Atlantic Basin suppliers like the US have ramped up deliveries to Asia.

Russian shipments have risen too, following assaults on its refineries that curbed domestic needs, aided by temporary US sanctions relief enabling more cargoes globally.

Declining Demand Amid Heightened Price Risks

Simultaneously, sluggish economic growth and elevated fuel costs are suppressing demand. End-users are cutting back, prompting refiners to lower operations and slash crude purchases sharply.

The IEA now projects global oil demand to drop 420,000 barrels per day in 2026, reaching 104 million barrels per day - a 1.3 million barrel daily cut from pre-conflict estimates.

Petrochemical and aviation sectors have suffered most, with rising prices and conservation efforts set to further limit fuel consumption soon.

Demand might rebound later in the year should a pact enable phased Strait of Hormuz reopening from the third quarter.

Yet supply recovery will lag, keeping the market in deficit through the year's end.

The agency's forecast assumes demand could resume growth by year-end if a war-ending deal permits gradual Hormuz flows from Q3 2026, though supply will trail behind.

'With global oil stocks already depleting at a record pace, additional price swings seem probable before peak summer demand,' the IEA stated.