The global oil market could enter a "red zone" in July or August as peak summer demand collides with disrupted Middle East exports and rapidly depleting inventories, the executive director of the International Energy Agency said on Thursday.
Speaking at Chatham House, Fatih Birol said that the scale of current oil and gas losses far exceeds previous global shocks, including the 1973 and 1979 oil crises and the 2022 European gas crunch following Russia's invasion of Ukraine.
Birol said the conditions may deteriorate further if supply disruptions persist, warning that the balance between supply and demand is tightening despite coordinated emergency measures.
He said global oil supply losses had reached around 14 million barrels per day, compared with about 10 million barrels per day during the combined earlier oil shocks, while gas disruptions had exceeded 130 billion cubic metres compared to 75 Bcm in Europe's recent crisis.
"This crisis is bigger, I would say much bigger, than all three crises in history put together," Birol said, adding that the closure of the Strait of Hormuz had also affected flows of fertilizers, petrochemicals, helium and sulfur, with wider implications for food and industrial supply chains.
Birol said the Hormuz remained the central vulnerability in the global energy system, arguing that only the "full and unconditional opening" of the strategic waterway could resolve the supply imbalance.
He warned that despite emergency stock releases and commercial inventories providing a buffer, those measures were being depleted. The IEA released 400 million barrels of oil from emergency stocks on March 11, which initially helped push prices down by about $20 per barrel, he said.
Though about 2.5 to 3 million b/d of previously released stock is still entering the market, Birol said that "stocks are eroding" while demand rises seasonally.
"This may be difficult, and we may be entering the red zone in July or August if we don't see that there are some improvements in the situation. This is how I see it," he said, pointing to the start of the peak summer travel season as a key demand driver.
He added that consumption was already declining in some regions due to high prices and rationing measures, particularly in parts of Asia most exposed to Hormuz-linked supply routes.
Birol said developing economies in Asia and Africa were bearing the heaviest burden of the crisis, particularly India, Pakistan and Bangladesh, where liquefied petroleum gas imports for cooking had been disrupted.
These countries are at the forefront of the problem, Birol said, noting that governments were introducing rationing and demand-reduction measures.
On oil market structure, Birol said countries would prioritize supply reliability over price alone when choosing energy partners, adding that "trust and security risk premiums" were becoming a key factor in global trade decisions.
He also said the Middle East would need to rebuild its reputation as a reliable energy export hub by diversifying supply routes, including pipelines designed to bypass chokepoints such as Hormuz.
Birol said emergency stockpiles still provided "significant firepower," with about 80% of the IEA's collective stocks still available for release if needed, but stressed that such measures could not solve structural supply constraints.
Looking ahead, Birol said energy prices are likely to increase. "What I'm afraid [of] is the following: the international energy prices, as a result of this, they are going to increase. And they are increasing. And this will affect the domestic prices in the petrol stations, in heating, and so on," he said.
He attributed the cause to "international tension," as opposed to governments. "However there may be some extreme groups - political groups - who can abuse this as a failure of the existing political system in their countries," he said.