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Global oil demand is expected to be almost one million barrels per day less than was forecast before the Iran war, as shortages and soaring costs prompt drastic cutbacks by consumers and businesses, a report by the International Energy Agency (IEA) said on Wednesday.

With the closure of the Strait of Hormuz choking off supplies and keeping prices high, less oil is being used to make products such as jet fuel, LPG cooking gas and petrochemicals, the Paris-based IEA said in its monthly oil report, forecasting the biggest quarterly demand drop since the COVID pandemic.

The Iran war “upends our global outlook”, the government-backed agency said, adding that it now expects oil demand to shrink by 80,000 barrels per day in 2026 from last year.

Before the conflict began, the IEA said in February it expected oil demand to rise by 850,000 barrels per day this year, meaning the difference between the pre-war and current estimates is 930,000 barrels a day, or 340 million barrels a year.

That could have a significant impact on the outlook for planet-heating carbon emissions this year.

At an intensity of 434 kg of carbon dioxide per barrel of oil – the estimate used by the US Environmental Protection Agency – the annual reduction in carbon dioxide emissions from oil for 2026, compared with the pre-war forecast, is similar to the amount emitted by the Philippines each year.

Harry Benham, senior advisor at Carbon Tracker, told Climate Home News that he expects at least half of the reduction in oil demand to be permanent because of efficiency gains, behavioural change and faster electrification.

The oil shock is leading to oil being replaced, especially in transport, with electricity and other fuels, just as past oil shocks drove lasting reductions in consumption, he said. “The shock doesn’t delay the transition – it reinforces it,” he added.

Demand takes a hit

While demand for oil has fallen significantly, supplies have fallen even further. Supply in March was 10 million barrels a day less than February, the IEA said, calling it the “largest disruption in history”.

This forecast relies on the assumption that regular deliveries of oil and gas from the Middle East will resume by the middle of the year, the IEA said, although the prospects for this “remain unclear at this stage”.

Last month, US Energy Secretary Chris Wright told the CERAWeek oil industry conference that prices were not high enough to lead to permanent reductions in demand for oil, known as demand destruction.

But the IEA said on Wednesday that “demand destruction will spread as scarcity and higher prices persist”.

Industries contributing to weaker demand for oil include Asian petrochemical producers, who are cutting production as oil supplies dry up, the report said, while consumers are cutting back on liquefied petroleum gas (LPG), which is mainly used as a cooking gas in developing countries, the IEA said.

Flight cancellations caused by the war have dampened demand for oil-based jet fuel, the IEA said. As well as cancellations caused by risk from the conflict itself, airports have warned that fuel shortages could lead to disruption.

Across the world, governments, businesses and consumers have sought to reduce their oil use after the war. The government of Pakistan has cut the speed limit on its roads, so that people drive at a more fuel-efficient speed, and Laos has encouraged people to work from home to preserve scarce petrol and diesel.

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Consumers in Bangladesh are seeking electric vehicles (EVs) to avoid fuel queues and, in Nigeria, more people are seeking to replace petrol and diesel generators with solar panels, Climate Home News has reported.

In the longer term, the European Union is considering cutting taxes on electricity to help it replace fossil fuels and France is promoting EVs and heat pumps.

IEA urged to help “future-proof” economies

Meanwhile, the IEA came under fire last week from energy security experts, including former military chiefs, who signed an open letter in which they accused the agency of offering “only a temporary response to turbulent markets”, calling for stronger structural action “to future-proof our economies”.

They said that besides releasing emergency oil stocks and offering advice on how to reduce oil demand in the short term, the IEA should show countries how to reduce their exposure to volatile oil and gas markets.

The IEA has also been under pressure from the Trump administration to talk less about the transition away from fossil fuels.

This article was amended on 15 April 2026 to correct the drop in 2026 forecast oil demand from “nearly a billion” to “nearly a million”

The post IEA slashes pre-war oil demand forecast by nearly a million barrels per day appeared first on Climate Home News.

IEA slashes pre-war oil demand forecast by nearly a million barrels per day