The International Energy Agency said on Tuesday that restoring shipping flow through the Strait of Hormuz is the single biggest factor that would ease global energy supply stress and bring fuel prices lower — as it simultaneously released data showing that oil and gas flows through the strait had collapsed to just 3.8 million barrels per day in early April, down from over 20 million barrels per day before the war began on February 28.
That single comparison — 20 million barrels per day to 3.8 million barrels per day — is the most precise and damning quantification yet of what the Hormuz closure has done to global energy markets. It means the world is currently moving less than one fifth of the oil and gas volume through the world’s most critical energy waterway that it was moving six weeks ago. The remaining 16-plus million barrels per day that previously transited the strait every day is either sitting in storage in the Gulf, being redirected through expensive and capacity-constrained alternative routes, or simply not moving at all.
The IEA’s revised supply and demand forecasts
The IEA’s revised figures represent one of the most dramatic single-report forecast revisions in the agency’s recent history. The agency cut its 2026 global oil supply forecast from a previously predicted increase of 1.1 million barrels per day to a drop of 1.5 million barrels per day — a swing of 2.6 million barrels per day in a single reporting cycle, driven entirely by the Iran war’s destruction of Middle Eastern production and export capacity. OPEC’s own April Monthly Oil Market Report had already documented a 7.70 million barrel per day collapse in DoC crude production in March alone, and the IEA’s revised forecast reflects the sustained nature of that disruption rather than a temporary shock.
The IEA also cut its 2026 oil demand forecast by 80,000 barrels per day, citing the Iran war, after previously expecting a 640,000 barrels per day increase. The demand cut reflects the economic damage the war is inflicting on global growth — higher energy costs suppressing industrial activity, consumer spending, and trade volumes in ways that reduce oil consumption even as supply is constrained.
The combination of a supply cut and a demand cut produces the IEA’s revised market balance figure — the agency now predicts global oil supply will exceed demand by 410,000 barrels per day in 2026, compared to a surplus of 2.46 million barrels per day in its earlier report. The dramatic narrowing of the surplus from 2.46 million to 0.41 million barrels per day explains why Brent crude is trading above $102 per barrel. A market that was comfortably oversupplied six weeks ago is now barely in surplus on paper — and the paper surplus exists only because the IEA is counting oil that is physically trapped inside the Gulf and cannot reach buyers.
The Hormuz number in context
The 3.8 million barrels per day flowing through Hormuz in early April against a pre-war 20-plus million barrels per day means that approximately 83% of normal Hormuz oil and gas traffic has been eliminated. The 20 million barrels per day figure includes both crude oil and refined products as well as liquefied natural gas — together representing approximately 20% of global oil supply and roughly 25% of global LNG trade that moved through the strait before February 28.
The pipeline bypass alternatives — Saudi Arabia’s East-West pipeline to Yanbu on the Red Sea coast and the UAE’s Habshan-Fujairah pipeline to the Gulf of Oman — together have a maximum combined capacity of approximately 6.5 million barrels per day, covering less than a third of normal Hormuz crude volumes and none of the LNG. The 3.8 million barrels per day currently flowing through Hormuz, combined with whatever is moving through the bypass pipelines, leaves a gap of several million barrels per day between what the world needs and what is physically reaching buyers.
What the IEA is saying about prices
The IEA’s statement that Hormuz shipping flow is the biggest factor in easing energy supply stress and lowering fuel prices is both analytically obvious and diplomatically pointed. It is analytically obvious because the Hormuz data makes clear that no alternative supply source, strategic reserve release, demand destruction measure, or policy intervention can substitute for restoring the 16-plus million barrels per day that has gone missing from the world’s energy supply chain. It is diplomatically pointed because it places the responsibility for the global energy crisis squarely at the door of the Hormuz situation — and by extension, at the door of the diplomatic failure to resolve the US-Iran conflict before the strait was closed.
For India, whose equity markets reopened on Wednesday after the Ambedkar Jayanti holiday and whose rupee, current account, and industrial cost base are all under sustained pressure from exactly the supply shock the IEA is quantifying, the agency’s report provides the clearest official articulation yet of what restoring Hormuz flows would mean for the global economy — and therefore for India. Every million barrels per day restored to Hormuz transit reduces the upward pressure on crude prices, reduces India’s import bill, reduces pressure on the rupee, and gives the RBI more room to cut rates without triggering imported inflation.
The talks that may resume Thursday between the US and Iran in Islamabad or Geneva are not merely a diplomatic exercise. They are, as the IEA has now confirmed with hard data, the most important energy market intervention available to the global economy.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IEA data and forecasts are sourced from publicly available agency reports. Readers are advised to consult a SEBI-registered financial advisor before making any investment decisions. Business Upturn is not responsible for any decisions made based on this article.