The International Energy Agency (IEA) has issued a stark warning that the global oil market will remain in deficit until the final quarter of 2026, as the ongoing Gulf conflict continues to trigger unprecedented supply disruptions. According to the IEA's latest monthly oil market report, global oil supply declined by a further 1.8 million barrels per day (bpd) in April to 95.1 million bpd, taking total losses since February to 12.8 million bpd. With tanker traffic still restricted through the Strait of Hormuz, cumulative supply losses from Gulf producers already exceed 1 billion barrels, with more than 14 million bpd of oil now shut in, marking an unprecedented supply shock. Assuming flows through the Strait of Hormuz gradually resume from June, global oil supply is projected to decline by an average 3.9 million bpd to 102.2 million bpd in 2026.
US President Donald Trump has issued a five-month waiver of the Jones Act, temporarily freeing up American oil supply chains. According to The Wall Street Journal, the waiver allows ships carrying cargo between US ports to be built outside America, marking a significant policy shift. This development comes as Trump continues to signal flexibility on extending sanctioned Russian oil waivers, stating the US would 'do whatever is necessary' to stabilise the current energy situation. The Jones Act waiver is expected to facilitate the distribution of oil and gasoline more efficiently, with dozens of voyages now helping to distribute these critical energy supplies across the country.
In a significant development, Trump expressed confidence that Russia and Ukraine are very close to reaching a settlement in ending the war. As reported by The Hindu, when asked about the Iran conflict, he said oil prices will drop drastically once the conflict ends, which he believes will be soon. This represents a notable shift from previous statements about the war's duration, suggesting that diplomatic efforts may be bearing fruit. The President's renewed optimism about peace negotiations comes as markets continue to monitor the ongoing conflict's impact on global energy supplies and prices.
Global oil demand is experiencing significant contraction as refiners reduce operations and scale back crude imports. According to the IEA, Chinese seaborne crude imports fell by 3.6 million bpd from February to April, with major reductions also seen in Japan at 1.9 million bpd, South Korea at 1 million bpd, and India at 760,000 bpd. While the slowdown in global refinery activity, by around 5 million bpd year-on-year in April, has temporarily eased tensions in the crude market, tightness is quickly spreading to product markets. The Paris-based international body expects global oil demand to contract by 2.4 million bpd year-on-year in the second quarter of 2026 and decline by 420,000 bpd for the year as a whole, making it 1.3 million bpd weaker than its pre-conflict forecast.
Trump further claimed that the US economy was poised for what he described as a 'Golden Age,' adding that the inflationary pressures would ease sharply after the conflict. According to Business Standard, he hinted towards a 'gusher of oil' which would eventually result in a lowering of inflation. 'You're going to see the Golden Age of America, frankly, and you're seeing it now. So as soon as this is — don't forget, you have hundreds of ships that are loaded up with oil that want to come out. As soon as they come out, we're going to have a gusher of oil and you're going to have inflation that goes way down,' Trump stated. The President compared current inflation levels favourably against those under Joe Biden, claiming Biden presided over the highest inflation in US history. 'Inflation is much lower than it was under Biden. Biden had the highest inflation in the history of our country. Inflation is nothing by comparison, but our inflation is just short-term. Because if you go back to just before the war, we were at 1.7% for the last three months,' Trump stated. He argued that inflation was already lower and would fall further, potentially to 1.5%, once the war ended, with the current inflation rate averaging 1.7% over three months before the conflict began.
