The International Energy Agency (IEA) has sharply lowered its outlook for global oil supply in 2026 amid escalating conflict in the Strait of Hormuz and Bab al-Mandeb.

In its latest monthly report, the IEA said global oil supply is expected to decline by 4.3 million barrels per day (bpd) this year, up from its previous forecast of a 3.7 million bpd decline issued in July, The Caspian Post reports, citing Al Jazeera.

“With an agreement enabling the reopening of Hormuz and unhindered transit through the Bab el-Mandeb Strait still elusive, we have again lowered supply estimates for the rest of the year,” the report said.

The revised forecast represents a 4% reduction in global oil supply and would leave supply around 1.27 million bpd below demand.

The IEA expects the global oil market to face a deficit of 1.8 million bpd between July and September, marking the largest quarterly shortfall since 2021.