Global oil markets are facing one of their most significant disruptions in recent history, with demand now expected to decline in 2026 as conflict in the Middle East continues to affect supply chains and pricing.
The International Energy Agency (IEA), in its latest Oil Market Report, revised its outlook to show a projected decline of 80,000 barrels per day in global oil demand for 2026, reversing earlier expectations of growth. The agency also forecast a sharper contraction of 1.5 million barrels per day in the second quarter of the year, marking the steepest drop since the pandemic period.
The shift comes as supply conditions tighten. Global oil supply fell by 10.1 million barrels per day to 97 million barrels per day in March, driven by attacks on energy infrastructure and restrictions on tanker movements through the Strait of Hormuz. The disruption has affected crude flows and refinery operations, with global crude runs now expected to decline by 1 million barrels per day on average this year.
Inventories have also been drawn down significantly. Global oil stocks fell by 85 million barrels in March, with regions outside the Middle East Gulf accounting for a substantial portion of the decline as shipping routes were constrained. The resulting supply shock contributed to a sharp increase in oil prices during the month.
While a brief ceasefire between Iran and the United States provided temporary relief, the IEA said uncertainty remains over whether normal shipping flows through the Strait of Hormuz will resume. The agency identified the restoration of these flows as a key factor in stabilising supply, easing price pressures, and supporting broader economic conditions.
Recent developments have added further uncertainty. The United States has signalled plans to block maritime traffic linked to Iranian ports, raising the risk of prolonged disruption to one of the world’s most critical energy transit routes.
For the Maldives, the evolving situation carries implications beyond global market movements. As a country heavily reliant on imported fuel, sustained disruptions and elevated oil prices could translate into higher costs for electricity generation, transport, and logistics. This may place additional pressure on public finances and the cost of living, particularly if supply constraints persist.
At the same time, reduced global demand could partially offset price pressures over the longer term. However, the near-term outlook remains uncertain, with supply disruptions and geopolitical developments likely to continue shaping energy markets and their downstream effects on import-dependent economies such as the Maldives.
