Middle East peace deal could herald oil glut next year, says IEA - Financial Times

Middle East peace deal could herald oil glut next year, says IEA

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Middle East peace deal could herald oil glut next year, says IEA

‘Gradual’ return of flows will give way to sharp rise in production, outstripping forecasts for increased demand

!Three oil pumping jacks operate in a snowy oilfield with dry grass

*Gulf oil flows are set to resume gradually as countries bring shuttered oilfields back online, according to the IEA

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Malcolm Moore in London

PublishedJune 17 2026

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A glut of oil will emerge next year if the peace deal in the Middle East holds, the International Energy Agency predicted on Wednesday, as crude production surges in the wake of the Iran conflict.

The IEA’s monthly report on the oil market took its first look at the aftermath of the war, as the US and Iran prepare to sign an interim peace deal on Friday that will extend the current ceasefire for 60 days.

There would be a “gradual” resumption of oil flows from the Gulf this year as countries started to revive oilfields that had been shut for months, IEA analysts said. Production would then rise by 8mn barrels a day to 110mn b/d by next year, far ahead of a “relatively modest” 2mn b/d rise in global oil demand, they added.

This will create a “significant overhang” that “may provide a welcome respite to the market and an opportunity to replenish depleted inventories, or to build new strategic reserves”. The agency noted oil stocks in OECD countries had now fallen to their lowest level since 1990.

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The long way back from the Iran energy shock

Countries such as the United Arab Emirates, which left the oil producer group Opec during the crisis, are poised to expand production, while Saudi Arabia has said it can return to its prewar production levels in just three weeks. Meanwhile, the US, Brazil and Venezuela have all increased their production in recent months in response to the war.

While the recovery from the crisis is yet to begin in earnest, oil traders have sold heavily since the interim deal was announced on Sunday. Benchmark Brent crude stood at about $79 a barrel on Wednesday, down from about $87 at the end of last week and a peak of $126 a barrel at the end of April.

Fatih Birol, the IEA’s executive director, previously described the supply shock from the conflict as the biggest energy crisis in history, after the closure of the Strait of Hormuz export route removed more oil from the market than the twin oil shocks of the 1970s and Russia’s 2022 invasion of Ukraine combined.

Despite the loss of supply, the price of Brent crude never came close to the record high of $147 a barrel set in 2008, as the US regularly raised hopes of a breakthrough in negotiations, emergency stocks cushioned the market and countries, especially in Asia, dramatically scaled back their purchases.

The IEA noted that oil prices had already plunged between May and mid-June, as