Global demand for crude oil is on course for its steepest quarterly decline since the Covid-19 pandemic of 2020, as a war in the Persian Gulf chokes off supply through one of the world's most critical maritime chokepoints. The International Energy Agency (IEA), a Paris-based intergovernmental body that monitors global energy markets, has described the situation as "the greatest disruption in the history of the oil market."

At the heart of the crisis is the Strait of Hormuz, a narrow waterway between Iran and the Arabian Peninsula through which roughly a fifth of the world's oil supply normally passes. With tanker traffic through the strait having ground to a near halt, daily global oil supply has fallen by close to ten percent — equivalent to more than ten million barrels per day. Oil prices are currently hovering around $100 per barrel, but IEA director Fatih Birol warned that current prices do not yet reflect the full severity of the shortage. "The prices are already high, but not yet a reflection of the seriousness of the problem," Birol said, adding that the worst economic consequences are still to come.

In an effort to cushion the blow, IEA member countries last month released more than 400 million barrels from their strategic petroleum reserves — emergency stockpiles maintained precisely for such crises. The move briefly pushed prices down, but the effect was quickly reversed after renewed threats against Iran from US President Donald Trump unsettled markets. The Netherlands alone released 5.36 million barrels, around 20 percent of its total national reserve.

Analysts warn the situation could deteriorate sharply if the conflict drags on for months. Energy expert Jilles van den Beukel of the Hague Centre for Strategic Studies noted that long-term futures prices suggest markets currently expect the conflict to be short-lived, but cautioned that a prolonged crisis could push prices to between $150 and $200 per barrel — potentially driving diesel costs in Europe above three euros per litre. In Europe, supplies of oil, diesel, kerosene, and petrol remain adequate for now, with analysts suggesting that demand will likely fall on its own as prices rise, naturally limiting shortages before physical scarcity sets in.

The IEA's monthly report made clear that "demand destruction will spread as scarcity and higher prices persist" — a term economists use to describe the process by which consumers and industries are priced out of using a commodity. For a global economy still navigating fragile growth, the agency's warning signals that the full impact of the Gulf conflict on everyday life, from fuel costs to freight and food prices, may not yet have been felt.