The International Energy Agency has warned that the ongoing conflict in Iran is inflicting severe damage on global oil demand, and a diplomatic resolution could soon flip the market from a supply shock into a significant surplus.
The agency's latest assessment highlights how the war premium that buoyed crude prices is rapidly eroding as economic activity slows in key consuming regions.
The IEA's analysis underscores a critical inflection point for energy markets.
While the initial phase of the conflict drove prices higher on supply disruption fears, the prolonged uncertainty is now actively suppressing consumption.
If hostilities cease, the sudden return of Iranian crude to global markets—combined with existing spare capacity—could create a massive inventory overhang that drags prices well below current levels.
This outlook aligns with broader market sentiment that the war premium is unsustainable.