IEA sees gradual Hormuz recovery tipping into significant 2027 surplus

The International Energy Agency (IEA) has sharply revised its 2026 global oil demand forecast downwards, predicting a 1.1 MMbpd decline as the world grapples with the protracted impact of the Strait of Hormuz closure. This critical reassessment, revealed in its latest monthly report, comes amidst a delicate US-Iran interim agreement to reopen the vital waterway, yet the agency projects a significant global oil surplus by 2027, signalling a complex and volatile rebalancing for energy markets. The '2026 Hormuz Crisis', stemming from a US-Iran conflict, brought the world's most critical oil chokepoint to a near standstill for months, disrupting over 14 MMbpd of Middle East oil output and triggering the largest supply shock in history. Following President Trump's June 15 announcement, an interim agreement is set for signing on June 19, aiming to restore commercial traffic, though operational complexities like demining and unresolved political constraints persist. This period saw global oil inventories, particularly in OECD nations, plummet to their lowest levels since 1990, while Brent crude prices surged to $126 a barrel at the crisis's peak. While oil flows through Hormuz have shown a partial recovery, rising from a May low of 9.6 MMbpd to around 12 MMbpd in early June aided by ship-to-ship transfers, the IEA cautions that a full return to pre-conflict levels is unlikely before 2027. The anticipated 2027 surplus, driven by an 8 MMbpd surge in global supply against a more modest 2 MMbpd demand increase, offers a crucial window for countries to replenish severely depleted strategic petroleum reserves. However, the path to market stability remains fraught with 'downside risks' as stakeholders navigate demining efforts, normalize supply chains, and contend with the enduring geopolitical complexities.