International Energy Agency (IEA) Executive Director Fatih Birol warned in October that global energy markets are unlikely to return to pre-war conditions in 2027.
The Iran War’s Impact on Global Energy Markets
In January, the IEA predicted a surplus in global oil and gas production in 2026 in its Oil Market Report. Global oil demand growth was expected to rise to 930,000 barrels per day (bpd) in 2026 from 850,000 bpd in 2025. The world’s oil supply was projected to increase by 2.5 million bpd in 2026 to 108.7 million bpd, following a 3 million bpd increase in 2025. At this time, benchmark crude oil prices were $16 per barrel lower than 12 months prior, indicating a large global supply surplus.
Meanwhile, the global LNG supply increased by nearly 7% in 2025 and was expected to accelerate further in 2026 to more than 7%, its fastest pace since 2019, according to the IEA. However, the outbreak of the war in Iran in February and the ongoing Middle East conflict have substantially changed global energy markets, prompting the IEA to revise those estimates sharply downward.
The 2026 Iran war began on February 28 when the United States and Israel launched coordinated large-scale military strikes against Iran, targeting Iranian military infrastructure, air defenses, and nuclear sites. The strikes killed Iran’s Supreme Leader Ali Khamenei and dozens of senior regime and military officials.
Iran responded with large-scale missile and drone strikes across the Middle East, targeting Israel, Gulf neighbors, and U.S. bases. It also attempted to close the Strait of Hormuz to commercial and naval shipping, thereby sharply restricting energy trade through one of the world’s most important oil and gas chokepoints.
In the IEA’s September Oil Market Report, the agency estimated that world oil demand would decline by 2.5 million bpd in 2026, largely due to trade restrictions through the Strait of Hormuz and high oil prices. The IEA said in September that it expects the total global oil supply to fall by 5.7 million bpd to 100.7 million bpd this year.
IEA Chief Warns of Longer-Term Impact of Conflict
The conflict in the Middle East and ongoing restrictions on energy trade have tightened the global energy market, reducing the availability of several fossil fuel products and pushing up oil benchmarks and refined product prices.
“I am afraid I don’t see any credible pathway that the markets will go next year, where we were before this war… started,” the IEA executive director, Fatih Birol, stated at the Singapore International Energy Week conference in October.
“So therefore, we all need to get prepared, taking… energy security as a number one priority in our government, business world, but without forgetting what is the next chapter for the countries and for companies that are all here today,” Birol added.
On October 23, Brent crude futures rose to almost $117 a barrel, the highest level seen in almost six months and marking a nearly 60% increase on its pre-war level. “Oil prices are flirting with $120 a barrel, and the prices for products are… much higher,” Birol said during the press conference.
While Birol did not predict how oil prices may shift in the coming months, he did speak on the importance of the price shift for several countries. “I can tell you that the current price of oil is, for some countries, for example in Europe, maybe not so high and affordable. But in many parts of the world, having almost $120 oil prices is having a major impact on trade deficits,” said Birol.
The IEA chief also voiced concerns about the fuel supply in certain parts of the world. “I am worried… for refined products because we are entering…winter season. Some parts of the world, where typically diesel demand goes high and several refineries are going through maintenance period,” said Birol.
“In Europe, we are facing a tough winter because European countries have decided to cut gas imports from Russia, and with the additional problem now rising from the Iran war, namely Qatar and the Emirates not being able to export gas as they were before, will put significant pressure on gas markets,” added Birol. However, he also said he expects the fuel restrictions to help support a “strong comeback” for the nuclear power sector.
Energy Security Threats
During the Financial Times Energy Transition Summit in London, Birol discussed the potential long-term, structural impact of the conflict. Birol told reporters, “I’m very worried that there will be some overlapping crisis in [the] Middle East… there may be some other crisis, and it may further escalate the situation, which will have serious implications for the energy markets.”
Birol suggested that the global energy agenda may change depending on the severity of the ongoing limitations to energy trade. He stressed that while energy security and climate change objectives are currently “closely aligned”, “climate change is sliding down the international policy agenda,” despite the increase in extreme weather events. However, he also emphasized the need to expand renewable energy capacity, which he said is cost-competitive and relatively quick to deploy.
The IEA’s outlook highlights how the war in Iran could reshape global energy markets beyond the immediate disruption to oil and gas supplies. While governments may prioritize energy security in the near term, the scale and duration of the crisis will influence investment decisions, trade flows, and the pace of the energy transition. A return to pre-war conditions will largely depend on the duration of the conflict.
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