Global Oil Demand Starts Rebound, IEA Warns Hormuz Still Unstable

Global energy demand has started to recover as oil shipments through the Strait of Hormuz partially resumed in June, the International Energy Agency (IEA) said. 

Renewed fighting between the US and Iran has added uncertainty to that outlook and international crude prices. Oil consumption has rebounded from a May low, the IEA said on Friday. 

A recovery in global oil demand from a low of 97.9 million barrels a day in May "is underway," the IEA said. By October, demand will be up by more than 8 million barrels a day from the May low.

This puts it above 2025 levels for the first time since February. This is a milestone given the scale of disruption caused by the conflict. 

The forecast for the year’s average oil demand declined to 1.0 million barrels a day, the agency said. That compares to a previous estimate of around 1.1 million barrels a day due to the Iran conflict. 

Global oil supply rebounded by a sharp 4.1 million barrels a day to 98.8 million barrels a day in June, the IEA said. World output was nevertheless some 9.4 million barrels a day below pre-war levels, it added.  

Oil prices ended the week higher because of renewed clashes between the US and Iran. Crude oil settled around $71 per barrel, recording a weekly gain of about 4%.

These forecasts hinge "on the assumption that tanker flows through the Strait will gradually recover," the IEA said. "Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement."

Geopolitical Drag Persists 

The International Monetary Fund (IMF) said on Wednesday that it expects the reopening of the Strait of Hormuz to begin in mid-July. Conditions will broadly return to the pre-war state of affairs by March 2027. 

This suggests prolonged geopolitical drag even as markets begin to stabilize. 

"The latest escalation in US–Iran military tensions this week raises new risks," Warren Patterson, Head of Commodities Strategy at ING Think, wrote on Thursday. "Recent developments show that safe passage of vessels is still an issue facing the market. 

Oil flows have been in the region of 14 million barrels a day when volumes bypassing the Strait are taken into account, Patterson wrote. This is still far below the pre-war levels of 20 million barrels per day, but up significantly from the levels seen during the war’s peak. 

Global GDP Weathers War Shock 

The IMF also said that the global economy has weathered the war in the Middle East "better than feared." This suggests the shock has been contained. 

Inventory drawdowns and expanded production outside the Persian Gulf mitigated the oil price increase, the IMF said. Renewable energy, combined with lower energy intensity than just a few years ago, has made many economies more resilient to an energy shock, a structural buffer that did not exist a decade ago. 

Global growth in Q1 "turned out to be stronger than expected," the IMF said. It slowed from 3.8% in Q4 of 2025 to 3.0% on a quarter-over-quarter annualized basis. That was better than the 2.7% forecast by the IMF in April. 

“We are projecting global growth of 3% in 2026 and 3.4% in 2027,"  Petya Koeva Brooks, Deputy Director, IMF Research Department, said. "We expect a V-shaped recovery, weaker growth this year relative to our pre-war forecast, followed by a rebound next year.” 

US GDP increased at an annualized rate of 2.1% in Q1 2026. This was slower than the 2.5% projected in April, but "still a solid pace," the IMF said.

AI Drives Momentum

The IMF added that two major forces have shaped global economic activity. The first is the war in the Middle East. 

The second is the "ongoing positive technology shock" manifesting in accelerated momentum of the global technology cycle, the fund said. Advances in and deployment of artificial intelligence (AI) have provided a counterweight  to war-related weakness. 

The modest slowdown "reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle thanks to advances in artificial intelligence (AI) and its adoption," the IMF said.  

In the US, continued technology-related business investment and productivity strength have supported economic activity. This has limited the war’s impact despite its status as a net energy exporter.

It shows how the tech cycle is shaping macro outcomes as much as geopolitics.