New Delhi, May 13: The International Energy Agency (IEA) has reported that the ongoing conflict in Iran is significantly affecting oil production. In its Oil Market Report for May 2026, the agency stated that the ongoing tensions between the United States, Israel, and Iran have severely disrupted oil production in the Middle East, leading to an inability to meet global oil supply demands this year.
The report highlights that over ten weeks into the conflict, various complications have arisen regarding oil supplies from the Strait of Hormuz, which is causing global oil reserves to deplete at a record pace. The IEA noted that conflicting signals regarding the prospects for a resolution to the conflict between the U.S. and Iran have resulted in substantial volatility in global oil prices.
The IEA stated, “The movement of tankers through the Strait of Hormuz remains restricted. Total supply losses from Gulf producers have already exceeded 1 billion barrels, with over 1.4 million barrels of oil production halted daily. This is a significant blow to supply.”
The report also points to erratic pricing trends. It mentions that the price of North Sea dated crude oil reached as high as $144 per barrel before falling below $100, only to rise again to around $110 per barrel. As of the report’s writing, no agreement had been reached between the two countries regarding the reopening of the Strait of Hormuz and ending the conflict.
Estimates suggest that by the third quarter of this year, tanker movements through the Strait of Hormuz may gradually return to normal.
The IEA predicts that the conflict will lead to a decline in global oil supply by approximately 3.9 million barrels per day (BPD) in 2026, a significant increase from its previous estimate of a 1.5 million BPD drop. During March and April, a total reduction of 250 million barrels, or about 4 million barrels per day, was recorded in global oil reserves.
Additionally, the agency has revised its estimate for oil demand this year, now projecting a decrease of 420,000 barrels per day, up from an earlier forecast of a decline of 80,000 barrels per day.
According to the IEA, the conflict has caused a sharp rise in oil prices, increasing the risk of reduced demand and slowing global economic growth. High oil prices, a weakening global economy, and fuel-saving measures are expected to exert further pressure on global oil consumption in the future.