Oil prices decreased on Tuesday, as the International Energy Agency predicted that “demand destruction will increase” due to mounting supply constraints and rising average prices resulting from the Middle East conflict.
U.S. crude oil futures set for May were down 2.74% to $96.37 per barrel at 3:55 a.m. ET. The international standard Brent for June was down 1.03% at $98.34 per barrel.
The ongoing conflict has already caused the most significant oil supply disruption on record, according to the IEA, along with the largest monthly price surge ever seen in March.
Oil prices also fluctuated on Tuesday due to reports indicating that peace negotiations between Washington and Tehran might resume within the week after unsuccessful talks over the weekend.
The latest projections from the IEA suggest a possible contraction in global oil demand to the largest extent since the Covid-19 outbreak.
The agency noted: “Oil demand is anticipated to decline by 80 kb/d this year, as the war over Iran disrupts our global perspective.
“This figure is 730 kb/d lower than the previous month’s Report and a forecasted decline of 1.5 mb/d in 2Q26 would mark the steepest drop since Covid-19 drastically reduced fuel consumption.
“Initially, the most significant reductions in oil consumption have occurred in the Middle East and Asia-Pacific, particularly for naphtha, LPG, and jet fuel. However, demand destruction will extend as shortages and increased prices continue.”
U.S. Vice President JD Vance stated on Monday that the subsequent actions in U.S.-Iran peace efforts rely on Tehran, following weekend discussions that were unable to reach a resolution.
“Whether we engage in further discussions, and if we ultimately arrive at an agreement, I genuinely believe the decision rests with the Iranians, as we presented substantial proposals,” Vance mentioned in a Fox News conversation.
He also expressed that a deal could yield advantages for both parties if U.S. stipulations, particularly regarding Iran’s nuclear ambitions, are satisfied.
This development follows the U.S. initiating a “blockade” of Iranian ports in the Persian Gulf on Monday. President Donald Trump remarked on Sunday that the U.S. would block the strait, escalating tensions sharply after a two-week ceasefire.
The United States Central Command later specified that the measures would be applicable solely to vessels entering or exiting Iranian ports and coastal waters.
The blockade “directly threatens” Iran’s oil exports through the Strait of Hormuz, which averaged about 1.7 million barrels daily last month, according to Vivek Dhar from Commonwealth Bank of Australia.
“Consequently, the blockade further constricts both physical oil and refined product markets,” he stated.
