World oil consumption is expected to drop by one million barrels daily throughout 2026, the IEA stated on Friday, marking the first yearly reduction since 2020 when pandemic restrictions halted flights and closed factories.

The parallel highlights this year's reduction in one way, given that use plunged by nearly eight million barrels daily during the pandemic peak, yet it shows the serious harm caused by the Strait of Hormuz shutdown to worldwide economic activity.

The decrease appears "strongly concentrated across both fuel types and geographic areas", the organization stated in its monthly assessment.

Prior IEA reviews linked the biggest reductions to Asia's reliance on imports and to chemical inputs including naphtha and liquefied petroleum gas, with routes passing through the Strait of Hormuz.

Currently, the near-term Brent crude futures, the global standard, stand near $76 per barrel, about 6% above levels before US and Israeli attacks on Iran began in late February, and well under the March highs near $120 amid peak tensions.

The American reference, WTI, sits lower near $72 per barrel.

June's tentative recovery

Output rose markedly last month, though starting from a very weak point.

Worldwide production increased by 4.1 million barrels daily in June to 98.8 million after partial Strait of Hormuz access enabled Gulf suppliers to resume capped wells, even though volumes remained 9.4 million barrels daily below pre-conflict figures.

Gulf shipments, including those diverted around the strait, rose by 6.5 million barrels daily to 16.1 million. Prior to the late February clashes, the area averaged 24 million barrels in daily exports.

Global oil stocks expanded for the first time since US and Israeli actions against Iran sparked the fighting, ending a stretch of historic withdrawals, though reserves in major economies continued to fall as importers limited purchases.

The ceasefire falters

The IEA projections assume a truce that now faces clear pressure and gradual reopening of the Strait of Hormuz.

Under that scenario, global supply would fall by 3.7 million barrels daily this year, resulting in output 860,000 barrels daily below use, before rising by 7.5 million next year and creating excess.

Greater production in other regions and softer demand than anticipated prior to the conflict might still create a surplus before year-end, enabling nations to replenish drawn-down stocks, the IEA added.

This week saw the second and much bigger violation of last month's agreement.

Following Iranian strikes on three commercial ships Monday and Tuesday, US Central Command targeted over 80 sites in Iran, covering air defenses, coastal radar and more than 60 Revolutionary Guard vessels, while Washington ended the permit for Iranian oil sales.

Iran launched drones and missiles toward Bahrain and Kuwait with limited impact, and US President Donald Trump has since stated the truce has ended.

Tehran maintains that only its designated path through the Strait of Hormuz is secure as tanker traffic dropped to 13 vessels on Wednesday, compared with a prior weekly average of 33 daily, per Kpler shipping figures.