Demand for oil has reached its peak

The US-Israeli-Iran war could be remembered for many things, including the closure of the Strait of Hormuz, the reshaping of Middle Eastern geopolitics, and the damage done to the global economy. Yet there is another consequence that is less obvious: the largest disruption to oil supplies in modern history hastened the arrival of peak global oil demand.

Four months ago, the virtual closure of the Strait of Hormuz triggered a global energy crisis. Oil prices soared, trade flows were disrupted, governments scrambled to protect consumers from rising costs, and companies were forced to adapt to an increasingly uncertain energy environment. But amid the disruption, another trend emerged: countries began to adjust to life with less oil. What began as a supply-side shock increasingly became a demand-side story, forcing the energy sector to reexamine one of its most important assumptions—that global demand for oil would continue to grow.

Before the war, the International Energy Agency (IEA) estimated that oil demand would "grow by 2,5 million barrels per day from 2024 to 2030, reaching a level of about 105,5 million barrels per day by the end of the decade." The debate was not about whether demand would continue to grow, but about how quickly that growth would slow.

Now the IEA predicts that global oil demand in 2026 will be about 1,3 million barrels per day lower than expected before the war. Part of that decline is due to weaker economic conditions and higher prices, and the rest reflects a period of adjustment: Faced with limited supplies and unprecedented uncertainty about the world’s most important energy bottleneck, governments and industries have accelerated efforts to reduce their dependence on oil.

Markets have reacted accordingly. Oil prices rise after new attacks and fall when there are reports of diplomatic progress. US West Texas Intermediate (WTI) crude oil was above $90 per barrel in the first week of June, while Brent closed at around $93 per barrel. Although prices have retreated from the peaks reached in the earlier phase of the conflict, they are still around 30% higher than before the outbreak of war.

Indeed, in the face of the biggest supply disruption in modern energy history, the market response has been surprisingly subdued. But this relative calm masks a worrying reality: global supplies are being depleted at record rates, leaving a much smaller buffer if disruptions continue. Before the conflict, between 125 and 140 ships passed through the Strait of Hormuz every day. The waterway was considered vulnerable but reliable, and any prolonged disruption was considered unlikely.

The past three months have shown that the Strait of Hormuz does not have to be formally closed for its capacity to be severely constrained. Reduced tanker traffic, threats to shipping, mine laying, insurance company withdrawals, military operations and ongoing uncertainty have disrupted trade flows and forced governments and companies to reexamine long-held assumptions about energy security. Even if a ceasefire is reached, traffic normalizes and the mines are eventually removed, the experience of the past four months cannot be erased.

This forced adaptation is most visible in Asia, where China could be one of the most important stories of this war. Before the conflict, China imported about 11 million barrels of oil per day. Since then, imports have fallen sharply as the country has started to use existing stocks, adjust refinery operations, partially replace oil feedstocks for the petrochemical industry with coal, slow the increase in inventories, and implement austerity measures. According to several analysts, China’s ability to reduce imports is one of the main reasons why oil prices have not risen as much as many feared.

China’s role is particularly significant because it has been the main driver of global oil demand growth over the past decade. Between 2015 and 2024, China’s oil demand grew by almost 6 million barrels per day, accounting for about 60% of total global demand growth. However, even before the war, the IEA had expected China’s oil demand to peak during this decade, driven by the increasing use of electric vehicles, liquefied natural gas trucks, high-speed rail, and demographic changes that will limit future consumption growth. The war appears to have accelerated this trend.

China is not alone in this. Governments across Asia and elsewhere are increasingly resorting to what can only be described as survival measures. A four-day workweek, expanded teleworking, restrictions on air conditioning, rationalization of industrial consumption, emergency subsidies, tax breaks, and direct support for agricultural inputs have become part of the standard policy arsenal. More than 100 countries have introduced measures to mitigate the economic fallout from the disruption.

These policies are designed to keep economies running, maintain social stability, and keep governments in power—reaffirming an argument that Richard Haass and I recently made in a commentary. Energy security can no longer be seen simply as securing sufficient fuel supplies. It must also encompass diversification of sources, redundant capacity, strategic reserves, resilient infrastructure, alternative transportation routes, flexibility in fuel use, and reduced dependence on individual bottlenecks in the system. The war with Iran has become a real test of that concept.

The great irony is that US President Donald Trump returned to power advocating US energy dominance and continued growth in hydrocarbon production. Yet the disruptions associated with his war are accelerating precisely what many oil producers feared: an earlier peak in global oil demand. This outcome has been accelerated not because climate policy has suddenly won, nor because governments have collectively decided to consume less oil, but because energy insecurity has forced all actors to adapt.

The lasting legacy of this war is therefore reflected in the way it has changed the way governments, companies and consumers think about energy security. The assumptions that shaped the pre-war energy system – abundant supply, reliable passage through the Strait of Hormuz and the belief that disruptions would be temporary – no longer hold. Three months of disruption, shortages and forced adjustment have pushed peak demand from the horizon to the rearview mirror.

The author is Associate Dean and Professor at the Center for Global Affairs at the School of Professional Studies at New York University; founding director of the Energy, Climate, and Sustainability Laboratory at NYU

Copyright: Project Syndicate, 2026.