The International Energy Agency warned on Friday that the renewed exchange of strikes between the United States and Iran on 7–8 July could upend its forecast of a substantial oil market surplus in 2027. The Paris-based agency had projected supply would outpace demand by 4.62 million barrels per day (bpd) next year, contingent on a sustained recovery of tanker flows through the Strait of Hormuz. That assumption now looks fragile: maritime traffic through the chokepoint has slowed to a trickle after both sides struck some 80–85 military targets each, and President Trump declared the ceasefire “over.”

Global supply rose by 4.1 million bpd in June to 98.8 million bpd, the largest monthly jump in years, as a temporary US-Iran understanding allowed the Strait to reopen. Gulf producers led the rebound, with Saudi Arabia, Kuwait and the UAE—which left OPEC in May—adding roughly 3.5 million bpd collectively. Yet total output remains 9.4 million bpd below pre-war levels, and Iranian production is stuck at 2.3 million bpd, a 36 per cent drop from February. The IEA now sees 2026 supply averaging 102.6 million bpd, a decline of 3.7 million bpd year-on-year but a slight upward revision from last month’s report.

On the demand side, the agency trimmed its estimate of the 2026 contraction to 1.05 million bpd, leaving global consumption at 103.46 million bpd. Demand hit a trough of 97.9 million bpd in May, then began recovering from mid-June as lower prices and the partial resumption of Hormuz transits released pent-up buying, particularly in Asia. The IEA expects a further seasonal lift during the northern summer, but warns that the pace of annual decline will only slow gradually, from 4.8 million bpd in the second quarter to 1.7 million bpd in the third, before turning positive in the fourth quarter.

Viewed from Washington, the administration is pursuing technical-level talks with Tehran even as military operations continue, while officials characterise Iranian attacks on commercial vessels as “acts of terrorism.” In Tehran, the government has not directly attributed the latest strikes, though a parliamentarian warned the UAE over its alleged support for the US. The next factual marker for markets is the OPEC monthly oil report, due on 13 July, which will offer a parallel assessment of supply and demand balances amid the renewed instability.