IEA Warns of 2027 Oil Glut Following U.S.-Iran Deal

The International Energy Agency warns that a peace agreement between the United States and Iran could trigger a global oil supply glut in 2027. The agency projects supply will surge by 8 million barrels per day to 110.3 mb/d, far outpacing a projected demand recovery of 2 million barrels per day and potentially creating a market excess of 5 mb/d.

This outlook follows a conflict that began on February 28 with U.S. and Israeli strikes on Iran, leading Tehran to close the Strait of Hormuz. The crisis depleted OECD inventories to their lowest levels since 1990, forcing governments to draw down 163 million barrels and prompting the IEA to coordinate the release of 400 million barrels in emergency stocks. While an interim deal to reopen the strait has already increased flows from 9.6 million barrels per day in May to 12 million in early June, the IEA notes that demining and transit risks remain.

Market uncertainty persists as President Donald Trump threatened to resume bombing campaigns if Iran does not behave, stating the memorandum of understanding is not yet final. Despite this, Brent crude prices have fallen by over $40 per barrel to approximately $78 in anticipation of normalized trade. These projections contrast with OPEC, which maintains a more optimistic 2026 demand growth forecast and recently raised its 2050 global demand projection to 124.1 million barrels per day, citing a global shift toward energy security and affordability.