IEA Warns U.S.-Iran Escalation Could Upend 2027 Oil Oversupply Outlook

The International Energy Agency said that a recent escalation in hostile actions between the United States and Iran could overturn its forecast that the oil market will shift into a significant supply surplus next year. According to Jin10, the IEA said global supply surged after the Strait of Hormuz reopened in June, but it remained below prewar levels. The IEA said a U.S.-Iran peace agreement last month helped reopen the Strait of Hormuz, giving the global oil market some relief. It noted that a full closure of the strait has historically cut crude flows by as much as 14 million barrels per day during the peak of the largest oil supply crisis. The agency said global oil supply rose by 4.1 million barrels per day in June, but was still 9.4 million barrels per day below prewar levels. The IEA forecast that supply will increase by 7.5 million barrels per day next year, but said this depends on improved passage through the Strait of Hormuz. It added that the escalation in hostilities from July 7 to 8 has clouded the outlook and could upend its projection that the market will turn to oversupply next year.