IEA Warns Iran War Created Worst Fuel Crisis in History

The world is facing the largest fuel crisis in history, according to the International Energy Agency’s (IEA) monthly report released Wednesday. The agency warned that oil supplies will not be enough to meet global demand this year, directly attributing the shortfall to the US-Israeli war on Iran.

Damage to oil production across the Middle East, primarily from the conflict, has resulted in an unprecedented supply shock. The IEA detailed that the war, along with damage to oil infrastructure in Iran and neighboring Gulf states, and the effective closure of the Strait of Hormuz, have driven crude prices sharply higher.

Unprecedented Supply Losses

With tanker traffic through the Strait of Hormuz disrupted, cumulative supply losses from Gulf producers have already surpassed 1 billion barrels. The IEA noted that more than 14 million barrels per day have been halted, creating an unprecedented shock that has rattled global energy markets.

The agency’s estimates now project a supply deficit of 1.78 million barrels per day for 2026. This marks a dramatic reversal from last month’s forecast of a 410,000 barrel-per-day surplus and a near 4 million barrel-per-day surplus predicted in December’s report.

Deficit to Persist Through Mid-2026

The Paris-based agency stated that its latest supply and demand estimates indicate a severe supply shortage will persist through the end of the third quarter of 2026, even if the conflict ends by early June. It warned that the deficit in the second quarter could reach 6 million barrels per day.

The IEA’s baseline scenario assumes a gradual resumption of navigation through the strait starting in the third quarter. This could allow the market to return to a slight surplus by the fourth quarter, enabling depleted inventories to begin recovery.

Record Stock Draws and Price Volatility

Supply losses have led to a draw of 246 million barrels from global oil stocks during March and April. The agency warned this could increase price volatility ahead of peak summer demand.

In March, the IEA, which counts 32 member countries, coordinated the largest-ever release of oil stocks, totaling 400 million barrels from strategic reserves in an effort to calm markets. Of that total, approximately 164 million barrels have already been drawn.

The agency concluded that total global oil supplies will fall by about 3.9 million barrels per day in 2026 due to the war’s fallout, compared to its previous forecast of a 1.5 million barrel-per-day decline. This stark revision underscores the geopolitical impact on global energy markets.