NEW YORK — For the first time since the COVID-19 pandemic hit in 2020, global oil demand is expected to fall this year, according to a new report from the International Energy Agency.
The agency projects that worldwide oil consumption will drop by roughly 1 million barrels per day in 2026. The decline has been driven by elevated oil prices and major disruptions to the physical supply of crude — though the impact has not been felt equally around the world.
Those supply disruptions stem from the ongoing war between the U.S. and Iran, which left oil tankers stranded in the Persian Gulf for more than three months. The ships were unable to safely pass through the Strait of Hormuz — a critical shipping corridor for global oil and gas — during that time.
Jim Burkhard, vice president and head of crude oil research at S&P Global Energy, warned that the situation at that key waterway remains unstable. “The future of Hormuz is probably more uncertain today than it was at the beginning of the war,” he said.
Burkhard noted that Iran continues to assert control over the strait, while the U.S. has yet to fully restore normal shipping operations, making a return to pre-war conditions unlikely in the near term.
In May, global oil demand averaged just 97.9 million barrels per day — a drop of 5.3 million barrels per day compared to the same time last year. Asia, which is heavily dependent on Middle Eastern oil, accounted for a large share of that decline.
China saw the steepest drop of any country, cutting its oil consumption by 1.5 million barrels per day — a 9% reduction — according to the report.
Burkhard said China made a deliberate decision to slash its purchases from the global market as prices climbed during the spring, reducing consumption by nearly 6 million barrels per day overall. “What China said is, ‘You know what, prices are high, there’s a crisis. We have this huge inventory stock, we can sustain demand. We’re just going to cut by 50% the amount of crude oil we buy,’” he said.
Daniel Sternoff, a senior fellow at the Center on Global Energy Policy at Columbia University, explained that one way China trimmed its consumption was by pausing the filling of its strategic petroleum reserve — a process that had previously been adding close to 1 million barrels per day. The crisis also pushed China further toward electric vehicles, which reduced its need for gasoline and diesel on the roads.
“What we’re tracking so far, at least since the crisis began, is China is probably on track to see somewhere between 500,000 and 600,000 barrels per day worth of demand losses for gasoline and diesel. So that’s pretty significant,” Sternoff said.
A fragile ceasefire allowed some vessels to pass through the Strait of Hormuz in June, easing supply constraints and pushing oil prices lower. But even as tensions between the U.S. and Iran flared again earlier this month, prices did not surge dramatically.
“This gray zone conflict that the U.S. and Iran are in, it’s not really a shock to the oil market,” Burkhard said. “It can push prices up and down a few dollars like it did the other day, but it’s not the same shock that it was in early March when Iran did what many thought was unthinkable.”
Experts also pointed out that there were simply fewer buyers in the market to absorb newly available supply. Beyond China’s reduced demand, several Russian oil refineries were knocked out of service by Ukrainian drone strikes, and refineries across the Middle East remained damaged from the war. As a result, prices for gasoline, diesel, and other refined fuels have remained elevated even as crude oil prices softened.
“There’s this gush of supply of crude oil being made available to the market, and there’s simply less demand for that crude oil,” Burkhard said.
The notable exception to the global trend has been the United States. Despite average gasoline prices surpassing $4.50 per gallon for regular unleaded in May — more than 50% higher than before the war began, according to AAA data — American drivers actually used more gasoline during the second quarter of 2026.
Sternoff offered a couple of explanations. He noted that the share of household income Americans spend on gas has been declining over time, and that many workers have been transitioning back from remote work to in-office jobs, putting more people on the road.
“Even though it’s a really political price that people pay a lot of attention to, if you are in the higher quintiles of income in the U.S., you might grumble about it, but you’re not really driving less just because of that increase in prices,” Sternoff said.
