Global oil demand is beginning to weaken as the energy crisis surrounding the Middle East intensifies, according to International Energy Agency Executive Director Fatih Birol, who warned that prolonged disruption around the Strait of Hormuz could push global markets into a far more dangerous phase.
Speaking at an event organized by Chatham House on Thursday, Birol said rising fuel prices and supply uncertainty are already starting to reduce worldwide oil consumption, a sign that the economic impact of the crisis is spreading beyond the energy sector.
“We are seeing global oil demand already beginning to decline,” Birol said.
“If prices rise even higher, this decline will become much more visible,” he added.
His remarks come amid escalating concerns over disruptions to oil and liquefied natural gas shipments from the Persian Gulf, one of the world’s most strategically important energy-producing regions.
The Strait of Hormuz, a narrow maritime corridor connecting the Persian Gulf to international shipping routes, handles a substantial portion of global crude oil and LNG exports.
Any disruption to traffic through the waterway immediately affects energy markets worldwide because many countries remain heavily dependent on Gulf energy supplies.
Birol warned that the situation could become significantly more severe in the coming weeks if the strait is not fully reopened.
According to him, the timing is particularly sensitive because global fuel consumption normally rises sharply during the Northern Hemisphere summer holiday season.
“The problem is that by late June and early July, the holiday season begins,” he explained.
“What does that mean? Normally, oil demand and consumption surge. As a result, oil inventories decline while no new oil supply is coming out of the Middle East.”
“This situation could become difficult and we may enter the Red Zone,” Birol said while discussing transportation bottlenecks affecting shipments from the Persian Gulf.
The IEA chief described the current crisis as potentially larger than all previous global energy crises combined.
He said global markets have already lost around 14 million barrels of oil supply per day due to disruptions linked to the conflict surrounding Iran and broader instability in the region.
By comparison, the oil shocks of the 1970s disrupted roughly 10 million barrels per day, making the current supply loss potentially even more severe from a volume perspective.
Birol also noted that global gas supply disruptions have surpassed 130 billion cubic meters, further intensifying pressure on energy markets already struggling with price volatility and geopolitical uncertainty.
The crisis escalated after the United States and Israel launched strikes on multiple targets inside Iran on February 28, causing significant damage and civilian casualties.
The military escalation immediately raised fears over energy security because Iran occupies a central position near the Strait of Hormuz.
Although Washington and Tehran later announced a two-week ceasefire on April 7, diplomatic negotiations have failed to produce a comprehensive breakthrough.
Subsequent talks held in Islamabad reportedly ended without agreement, prompting US President Donald Trump to extend the temporary suspension of hostilities in order to give Iran additional time to formulate what he described as a “unified proposal.”
Despite the temporary pause in direct military confrontation, tensions in the region have continued disrupting shipping operations and energy flows.
The instability has effectively created a de facto blockade around the Strait of Hormuz, significantly complicating the transport of oil and LNG from Gulf producers to international markets.
The impact has already spread across global supply chains.
Many countries are now experiencing higher fuel prices, increased transportation costs and rising prices for industrial products that depend heavily on energy-intensive manufacturing and logistics.
Energy markets initially entered the crisis from a relatively strong position.
Global oil inventories were high, and many countries had accumulated strategic reserves after previous periods of market instability.
According to Birol, those buffers initially helped soften the immediate impact of the supply shock.
However, he warned that the protective cushion is gradually being depleted as the crisis continues.
IEA member states have already released emergency reserves into the market in an effort to stabilize supplies and reduce panic.
Several countries have also introduced measures aimed at reducing energy consumption and improving fuel efficiency.
Still, Birol said these actions alone are unlikely to solve the broader structural problem caused by disruptions around Hormuz.
“The single most important solution to this problem is the full and unconditional reopening of the Strait of Hormuz,” he stressed.
The Strait of Hormuz remains one of the most critical chokepoints in the global energy system.
Roughly one-fifth of the world’s oil supply typically passes through the narrow waterway each day, making it highly vulnerable to geopolitical instability.
Major oil producers including Saudi Arabia, Iraq, the United Arab Emirates, Kuwait and Qatar rely heavily on the route for exports.
Any sustained interruption therefore creates immediate concerns about shortages, inflation and broader economic slowdowns.
Financial markets have closely monitored the situation as traders attempt to assess how long disruptions could continue.
Oil prices have experienced sharp volatility in recent weeks amid uncertainty surrounding regional security conditions and the future of negotiations involving Iran and the United States.
The possibility of prolonged instability has also increased fears of a wider global inflation shock.
Higher fuel costs affect transportation, manufacturing, agriculture and electricity generation, eventually raising consumer prices across multiple sectors.
Economists have warned that sustained energy price increases could weaken economic growth, reduce consumer spending and complicate central bank efforts to control inflation.
The aviation and shipping industries are particularly vulnerable to rising energy costs because fuel represents a major operating expense.
Airlines around the world have already begun warning about potential ticket price increases if oil prices continue climbing during the peak travel season.
Shipping companies also face higher operational costs as disruptions force vessels to reroute or experience delays linked to regional security concerns.
The current crisis has additionally revived concerns about the global economy’s continued dependence on fossil fuel supply routes vulnerable to geopolitical conflict.
Many governments have accelerated investment in renewable energy over the past decade partly to reduce exposure to such disruptions.
However, oil and natural gas still remain essential components of the global energy system, especially for transportation, heavy industry and electricity generation in many countries.
The situation has therefore highlighted the complex balance between energy security, geopolitical stability and economic resilience.
For Europe and Asia in particular, disruptions in Middle Eastern energy supplies create significant vulnerability because many economies rely heavily on imported fuel.
Several Asian countries depend extensively on Gulf oil shipments passing through Hormuz, making them especially sensitive to transportation disruptions.
At the same time, energy producers outside the Middle East could benefit financially from higher prices as global markets search for alternative supplies.
Some analysts believe the crisis may accelerate long-term investment into alternative energy sources, LNG infrastructure diversification and strategic petroleum reserves.
Others warn that prolonged instability could instead deepen economic uncertainty and increase political tensions globally.
For now, global markets remain focused on whether diplomatic efforts can prevent further escalation and restore full shipping access through the Strait of Hormuz.
Birol’s warning underscores the seriousness of the current situation and the risks associated with allowing supply disruptions to continue during a period of rising seasonal demand.
As governments, companies and consumers confront growing energy uncertainty, the future direction of the crisis may depend heavily on whether regional tensions ease or intensify further in the coming weeks.
With inventories gradually shrinking and demand expected to increase during the summer months, pressure on global energy markets is likely to remain elevated unless supply routes in the Persian Gulf return to normal operations.
