High oil prices due to the Strait of Hormuz have led to an erosion of demand that will ripple into 2027, according to the International Energy Agency (IEA).

The agency’s latest monthly oil market report lowered its prediction for global demand by 700,000 barrels per day compared to last month’s estimate, with oil deliveries dropping by 5 million barrels per day in the second quarter of 2026, according to CNBC’s coverage of the report. The agency expects global supply to drop by 3.9 million barrels per day to 102.4 million barrels per day before rising next year to 110.3 million barrels per day.

However, high fuel prices and product shortages have significantly reduced global oil demand. The IEA projects that supply will increase by around 8 million barrels per day, surging past next year’s increase in global demand of 2 million barrels per day. The agency predicts demand will rise to 105.3 million barrels per day, a little under 5 million barrels per day less than its supply estimate.

“Our first look at 2027 balances shows a significant overhang emerging next year,” the IEA said.