SINGAPORE, October 26, 2026: The International Energy Agency has warned that global energy markets could remain under severe pressure well into 2027, highlighting the longer-term economic consequences of the conflict involving Iran and the disruption of major oil and gas supply routes.
IEA Executive Director Fatih Birol told Singapore International Energy Week on Monday that a return to the energy market conditions seen before the conflict was unlikely next year.
The assessment points to a prolonged period of uncertainty for countries dependent on imported fuel, particularly those already facing inflationary pressures and external financing challenges.
International energy markets have undergone significant changes since the conflict began in February. Disruptions affecting Gulf production, shipping routes and petroleum exports have reduced supply flexibility at a time when several major economies remain heavily dependent on imported oil and gas.
The Strait of Hormuz, one of the world’s most important energy transportation routes, has experienced severe disruption, forcing exporters and buyers to reconsider established supply arrangements.
The consequences extend beyond crude oil prices. Refined fuels, including diesel, have also faced supply constraints, increasing costs for transport operators, industrial users and other businesses.
According to the IEA’s October oil market assessment, global oil inventories had fallen substantially below their pre-war levels by the end of September, reducing the reserves available to absorb further supply interruptions.
The agency also expects tight conditions in diesel markets to continue into 2027, even as some crude oil production and refinery activity recover.
Brent crude approached $117 per barrel late last week before easing on Monday. Prices nevertheless remained significantly higher than before the conflict, reflecting persistent concern about regional supply security.
High energy prices can affect importing countries through several channels. More expensive petroleum imports increase demand for foreign currency, while higher transport and production costs can eventually influence consumer prices.
For Pakistan, these developments are particularly relevant because imported crude oil, petroleum products and liquefied natural gas remain important components of the country’s energy supply.
A sustained increase in international fuel costs can place pressure on Pakistan’s import bill and complicate efforts to maintain price stability. The domestic impact, however, depends on exchange rates, government pricing decisions, consumption patterns and the timing of energy purchases.
The international outlook is also complicated by seasonal demand. Colder weather in parts of Europe and other Northern Hemisphere markets typically increases demand for heating fuels, while refinery maintenance can temporarily restrict the availability of certain petroleum products.
European natural gas markets face additional challenges from reduced Russian supplies and disruptions affecting exports from Gulf producers.
Against this background, Birol emphasised the need for governments to strengthen energy security rather than assume that existing supply arrangements will quickly return to normal.
The IEA chief also highlighted renewed international interest in nuclear power as countries explore ways to reduce their exposure to volatile fossil fuel markets.
He said approximately 90 gigawatts of nuclear generating capacity was under construction worldwide, representing the highest level in four decades.
The broader challenge for energy-importing economies is to manage immediate supply risks while developing more reliable and diversified sources of energy over the longer term.
For Pakistan and other developing countries, the IEA’s warning reinforces the importance of managing import exposure, improving energy efficiency and preparing for continued fluctuations in international fuel markets.
The pace of any recovery will depend on developments in the Middle East, the restoration of disrupted supply routes and the ability of producers and refiners to rebuild market inventories.