The World Bank described the Strait of Hormuz disruption as ’the largest energy supply shock on record.’
The World Bank has warned that disruptions in the Strait of Hormuz and escalating conflict in the Middle East are triggering a global oil supply shock that is beginning to suppress energy demand worldwide.
In its May 7 analysis, the World Bank said that global oil demand declined by 0.8 million barrels per day year-over-year in March and is forecast to fall by another 1.5 million barrels per day in the second quarter of 2026.
“Oil demand destruction is emerging,” the World Bank said, citing rising prices, trade disruptions, and reduced economic activity in advanced economies, Asia, and the Middle East.
The warning came as Brent crude prices surged following what the World Bank described as the “near-total disruption” of shipping through the Strait of Hormuz.
Roughly one-quarter of global seaborne crude oil trade passes through the narrow waterway.
By the end of March, Brent crude prices had risen approximately 65 percent, or $46 per barrel, marking what the World Bank called the largest monthly increase on record.
Prices later eased after a temporary ceasefire announcement but remained volatile amid uncertainty over negotiations involving Iran and the United States.
Historic Supply Shock
The World Bank projected that global oil output would decline by 6.9 million barrels per day, or 6.6 percent year-over-year, during the second quarter of 2026, representing the sharpest quarterly decline since the COVID-19 pandemic.
The United States is expected to account for most non-OPEC+ production growth, with output increasing by roughly 500,000 barrels per day, partially offsetting Middle East disruptions.
The report projected that oil markets would face a deficit of 3.7 million barrels per day in the second quarter despite emergency reserve releases and limited increases in supply from other producers.
“Even if disruptions ease later this year, oil markets are expected to stay tight in the near future amid ongoing geopolitical risks, uncertain regional flows, and dislocation of shipping assets,” the World Bank said.
The organization forecast Brent crude would average $86 per barrel in 2026 before declining to $70 per barrel in 2027 if regional supply conditions stabilize. However, it warned that renewed conflict or prolonged shipping disruptions could push Brent prices into a range between $95 and $115 per barrel this year.
