US-Iran escalation threatens oil supply recovery, warns IEA
Renewed military conflict between the U.S. and Iran has effectively closed the Strait of Hormuz, disrupting up to 14 million barrels of daily oil shipments. The IEA warns this escalation puts projections for global energy market stabilization in jeopardy.
Renewed military hostilities between the United States and Iran have placed the global energy supply recovery in jeopardy, according to an assessment released by the International Energy Agency (IEA) on Friday, 10 July 2026. The agency cautioned that the resumption of conflict threatens to overturn recent projections for market stabilization, particularly regarding the flow of crude oil through the Strait of Hormuz. The waterway, before the conflict erupted in April with US and Israeli strikes on Iran, carried roughly a fifth of the world's oil and liquefied natural gas exports. The IEA reported that the effective closure of Hormuz had cut as much as 14 million barrels per day (bpd) of crude oil flows.
The IEA’s July oil market report indicates that while global supply had risen by 4.1 million bpd in June—following a memorandum of understanding signed in mid-June between the two nations—total supply remains 9.4 million bpd below levels recorded before the conflict began. The agency had previously modeled a shift from an 860,000 bpd deficit in 2026 toward a 4.62 million bpd surplus in 2027, contingent on traffic through the Strait of Hormuz remaining uninterrupted. However, the latest round of fighting, triggered by rival interpretations of provisions governing the waterway, has caused shipping through the chokepoint to grind to a halt.
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Despite the disruption, Brent crude stood at $76.37 a barrel in early Friday trading, little changed from Thursday's close, though up more than $4 from a week earlier. Analysts said the relative calm reflected market confidence that the situation would stabilise, even as tightening inventories point to further upward pressure on prices in the coming weeks. Iran says it targeted “US bases and strategic centres” in Bahrain, Kuwait and Qatar after Iranian cities came under attack on Tuesday and Wednesday. Egypt and Gulf states held phone calls on Friday and said they were urging all parties to contain regional tensions and prevent a wider conflict, adding to the chorus of condemnation that followed Iranian strikes on Bahrain, Kuwait and Jordan.
Discussions were reported to have taken place through various channels, including a meeting between Iranian Foreign Minister Abbas Araghchi and Pakistan's Chief of Army Staff Asim Munir that lasted late into Thursday night. On Friday, Reuters, citing a source familiar with the situation, said Qatari negotiators were in Tehran to meet Iranian officials in an effort to de-escalate tensions and create conditions for broader negotiations to continue. The talks aim to address the implementation of the MoU and the issues that triggered the recent escalation between Washington and Tehran, including disputes over navigation in the Strait of Hormuz, Reuters reported.
Unnamed US sources reportedly told CNN that Washington was carrying out strikes and then pausing in order to avoid escalation and let diplomacy work. However, the CNN source also warned that the US military was fully prepared to launch new attacks if necessary. US President Donald Trump said Iranian attacks on commercial vessels in the Strait of Hormuz had effectively ended the temporary truce.
The IEA's forecast continues to rest on the assumption that a ceasefire holds and that Hormuz traffic gradually reopens. Should that assumption fail to hold, the agency's outlook for a rebalancing of global oil supply and demand next year would come under renewed strain.
