Relief Possible, but Global Energy Markets Still Under War Pressure

Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

Summary

The International Energy Agency warned of ongoing supply-side issues because of the war in the Middle East. An oil surplus is possible by the end of the year, though that's contingent on peace prospects.

Oil Production Well Below Pre-War Levels

Global crude oil production is about 9.4 million barrels per day (bpd) below early-year levels as a result of ongoing fighting in the Middle East, the International Energy Agency (EIA) said Friday.

Industrial Info has been following events related to the energy sector since the joint U.S.-Israeli airstrikes on Iran in late February triggered a conflict still percolating today. U.S. President Donald Trump said that a tacit truce with Iran was effectively over after a series of attacks on maritime interests in and around the Persian Gulf earlier this week.

The price of Brent crude oil, the global benchmark for the price of oil, is up more than 4% so far in July amid renewed tensions. Various media reports noted alarms were sounded Thursday in Bahrain, which hosts the U.S. Fifth Fleet, while missiles descended on Kuwait and Qatar.

Italian utility Edison SpA, a subsidiary of French energy company Électricité de France (EDF), reported last week that QatarEnergy would be unable to deliver LNG to a receiving terminal in Italy until at least September, extending a force majeure declaration that began as a result of war-related damage. Industrial Info Resources offers more information on the terminal in its Global Market Intelligence (GMI) Oil & Gas Terminals Plant Database.

About 12.8 million tons per annum (MTPA) of export capacity for liquefied natural gas (LNG) from the Ras Laffan North and Ras Laffan South facilities has been lost due to the conflict.

The International Energy Agency (IEA) in its monthly market report for July reported that the crude oil markets, meanwhile, could swing toward a glut by the end of the year, though that depends in large part on tankers moving easily through the Strait of Hormuz.

"Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalization in oil markets," the agency said.

A 14-point memorandum of understanding between the United States and Iran calls for a de-escalation in fighting and the reopening of the Strait of Hormuz, although Trump effectively poured cold-water on that agreement earlier this week from the sidelines of the NATO summit in Turkey amid the ongoing hostilities.

By the Numbers

• 4% jump in oil prices so far in July
• 50% of traffic resumed in Strait of Hormuz, Iran says

Truce on Ice

Trump spent much of Thursday posting videos of U.S. airstrikes on Iran on his Truth Social platform. For its part, the official Islamic Republic News Agency reported that tanker traffic through the Strait of Hormuz was at about 50% of its pre-war levels, adding the Iranian military has warned that "foreigners have no stake" in the strategic waterway.

The IEA in a separate report noted that different markets are reacting differently to the strains of war. High crude oil production and lower taxes help insulate the U.S. market, while Japan is largely protected by government subsidies. Europe, meanwhile, is stuck in the middle.

The IEA in its monthly oil market report said it expected demand to recover, driving up by more than 8 million bpd from the low-point in May. Nevertheless, overall demand could be around 1 million bpd less than year-ago levels before recovering next year.

Elsewhere, supply-side issues are readily apparent. The IEA said that global oil supplies grew 4.1 million bpd in June, though global output remains some 9.4 million bpd lower than pre-war levels.

In its weekly refinery report, IIR Energy reported, however, that domestic crude oil inventories reversed a months-long trend by increasing by nearly 3 million barrels during the week ending July 3, though the Strategic Petroleum Reserve remains hallway depleted.

In a separate report, the International Monetary Fund said that, to date, the war's impact on the global economy has been relatively muted, because many nations tapped their strategic crude oil stockpiles. Their ability to do that again is doubtful, as those stockpiles remain drawn down and have not been replenished. For more on that, see July 9, 2026, article - IMF: Middle East Conflict, Data Centers Will Shape Economic Growth in 2026.

• Supply-side buffers are dwindling
• Iran says "foreigners have no stake" in the Strait of Hormuz

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