Brent falls nearly 3% as IEA warns of oil demand decline
Brent crude fell nearly 3%, interrupting this week's sharp rally after the International Energy Agency (IEA) downgraded its outlook for global oil demand. Prices are still on track for their biggest weekly gain since July as the conflict in the Middle East continues.
According to Bloomberg, the IEA expects global oil demand to contract in 2026 by the most since the pandemic. The agency cited high fuel costs and reduced supply among the main reasons.
Despite the pullback, Brent has gained more than 70% since the start of the year. The price remains below its wartime peak of just above $126 a barrel reached in April.
High prices begin to weigh on demand
The rise in oil prices caused by supply disruptions in the Middle East is gradually affecting consumption. At the same time, global inventories remain low, while China's recent increase in purchases has further tightened available supply.
The situation is being complicated by escalating tensions around key shipping routes. Iran-backed Houthis have advanced toward coastal areas near the Bab al-Mandeb Strait and are attempting to seize Mokha at the southern end of the Red Sea.
Fighting across the region has intensified over the past two weeks. Houthi attacks on Saudi Arabia's energy infrastructure have forced some facilities to halt operations, while the U.S. has carried out strikes against Iranian oil tankers.
RBC Capital Markets analysts said a resumption of a full-scale war between Saudi Arabia and the Houthis could trigger a scenario of another sharp rise in oil prices. Control of areas closer to the narrowest part of the Bab al-Mandeb Strait would allow the group to expand its ability to disrupt shipping.
Risks also remain in the Strait of Hormuz. Some oil shipments continue to pass through the waterway, but vessels face the threat of attacks, while some tankers are switching off their transponders to reduce the risk of detection.
Conflict continues to threaten oil supplies
The U.S. and Iran are preparing for a prolonged confrontation, with no signs yet of an imminent ceasefire or normalization of energy flows. Saudi Arabia said its oil production fell again in August, reaching its lowest level since 1990.
The conflict is pushing up prices beyond crude oil. European natural gas, oil tanker freight rates and refined petroleum products have also risen significantly, with diesel prices climbing even more sharply.
Washington is also stepping up economic pressure on Tehran. President Donald Trump's administration is preparing additional sanctions measures against Iran for next week as the conflict continues.
Trump said he would make the decision to strike Iran again under similar circumstances. The U.S. is therefore continuing to combine military pressure with broader economic restrictions against Tehran.
Earlier, we reported that U.S. diesel prices reached a record high due to supply disruptions caused by the war. Higher fuel prices are increasing costs for transportation companies and adding pressure on consumers.
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