IEA Pushes Oil Surplus to 2027 as U.S.-Iran Strikes Resume and Hormuz Traffic Stalls Again

Since oil prices bottomed out below $68 per barrel in early July following the U.S.-Iran memorandum of understanding signed in mid-June, the market has reversed course sharply. ICE Brent was on track to settle above $76 per barrel as of Friday, July 10, according to OilPrice.com, a $4-per-barrel gain on the week driven by what traders are pricing as a revived Middle East risk premium.

The International Energy Agency's July Oil Market Report, published Friday, is the clearest summary of how fragile the post-ceasefire recovery was. The IEA said global oil supply rebounded by 4.1 million barrels per day (bpd) to 98.8 million bpd in June as tankers rushed to exit the Persian Gulf after the Strait of Hormuz reopened. Iran alone loaded accumulated crude it had been unable to move during the U.S. blockade running from mid-April through mid-June.

That momentum is now stalling. The IEA reported that tanker crossings through the Strait have slowed again, and the agency explicitly warned that the July 7-8 escalation "clouds the outlook and could upend the forecast that sees the market flipping to a surplus next year." The surplus call, which had been one of the market's anchoring assumptions, is now contingent on what the IEA called "a swift de-escalation of renewed hostilities." As of July 10, that condition has not materialized.

Global oil output still sits roughly 9.4 million bpd below pre-war levels, according to the IEA. Annual supply is now projected to fall by an average of 3.7 million bpd to 102.6 million bpd across 2026.

The Hormuz Bottleneck, Again

The Strait is the single point of failure that keeps resetting this market. OilPrice.com reported that QatarEnergy's LNG carriers Al Ghariya, Duhail, and Al Ruwais turned back from the waterway after renewed attacks on ships attempting to transit it. War risk insurance for vessels inside the Gulf has climbed toward 3% of a vessel's hull value, up from 2% at the end of last week, according to Reuters, with quotes as high as 5% still circulating.

Iran is not waiting to see how this resolves. According to OilPrice.com, Tehran loaded approximately 11 million barrels of crude on Thursday, July 9, racing to push exports out via the Gulf of Oman before President Trump threatened to reimpose a blockade on Iranian outflows.

Trump made another public pitch for further talks with Tehran on Friday, according to OilPrice.com. The market's response, a $4 rise in Brent, suggests traders are not treating that offer as a price-suppressing development.

The Case for a Different Reading

The strongest counter-argument to the bearish supply disruption narrative is that the June data genuinely showed the market's resilience. A 4.1 million bpd rebound in a single month is not trivial. OPEC and Gulf producers have repeatedly shown the ability to partially compensate for Iranian outages, and global demand was already recovering from destruction caused when crude topped $100 earlier this year, as the IEA noted. If de-escalation holds, even partially, the surplus mechanics still function. The IEA did not abandon the surplus forecast; it conditioned it.

But the conditioning is doing a lot of work right now.

India Moves to Protect Itself

At least one major importer is drawing the right lesson. India's state-owned oil firm ONGC announced plans to build a 13-million-barrel crude reserve in Mangalore, according to OilPrice.com. New Delhi is accelerating its strategic stockpiling program after the Hormuz blockade exposed how limited its emergency inventory buffer was. India is the world's third-largest oil importer and has significant exposure to Gulf supply routes.

Russia's Refinery Problem Ripples East

Separately, Ukraine's sustained drone campaign against Russian oil infrastructure has opened a second front in the global fuel disruption picture. Ukrainian drones knocked the Omsk refinery offline this week, according to OilPrice.com. Omsk processes nearly 22 million tons of crude annually, making it one of Russia's largest facilities.

The downstream effect landed hardest in Central Asia. Landlocked nations like Kyrgyzstan and Tajikistan depend on Russia for virtually all of their refined petroleum product supply—gasoline and diesel, not crude—because regional refining capacity is limited. Disruptions at Russian facilities translate almost immediately into fuel price spikes and shortages in Bishkek and Dushanbe.

Luca Anceschi, a professor of Central Asian Studies at the University of Glasgow, told RFE/RL the crisis reflects a structural failure: authoritarian governments in the region plan around political survival, not long-term energy security. "They worry about how to sell resources, not how to make the best use of them," he said.

Kyrgyz economist Tolenbek Abdyrov made the same point more directly: the region needed diversification, local refining capacity, and alternative import routes years ago. The Russian refinery campaign has made that gap impossible to ignore.

Russia itself responded to domestic fuel pressure by announcing a one-month ban on diesel exports, according to OilPrice.com. That ban removes roughly 0.5 million bpd of diesel from European markets, pushing European diesel crack spreads to a 15-year high of $60 per barrel.

The Open Question

The IEA's July report is built on a fragile assumption: that the Strait of Hormuz reopens, stays open, and tanker flows normalize enough to flip the market to surplus sometime in 2027. With QatarEnergy carriers already turning back and insurance costs spiking again as of this week, the pace at which that assumption degrades is the question the market is pricing in real time.