Oil’s Historic Shock and What It Means for Growth

The numbers from the International Energy Agency’s April 2026 Oil Market Report are difficult to overstate. Global oil supply fell by 10.1 million barrels per day to 97 million barrels per day in March, following continued attacks on energy infrastructure in the Middle East and the de facto closure of the Strait of Hormuz. The IEA called it the largest supply disruption in the history of the global oil market. For context, COVID-19 was the last event to produce demand destruction of comparable scale. Brent crude began the year at $61 per barrel. By the end of the first quarter it had reached $118 per barrel, a quarterly increase the EIA described as the largest on an inflation-adjusted basis since records began in 1988. Prices briefly touched nearly $150 per barrel in physical crude markets as refiners scrambled to replace locked-in Middle Eastern cargoes. Global oil demand is now projected to contract by 80,000 barrels per day on an average basis in 2026, a dramatic reversal from the 730,000 barrel per day growth that was expected before the conflict began. The EIA forecasts Brent prices will peak in Q2 2026 at around $115 per barrel before easing as production disruptions slowly abate, ultimately falling below $90 in Q4 2026. For S&P Global, these numbers justify cutting the 2026 global real GDP growth forecast by half a percentage point since February, to 2.4%. Excluding the pandemic-driven collapse of 2020, that would be the weakest rate of global growth since 2009. Higher energy prices squeeze household real incomes, consumer confidence is tumbling from already low levels in many economies, and rising inflation will lead to less accommodative financial conditions, all of which weigh on business investment and trade flows simultaneously.