IEA cuts outlook for oil demand as supply nosedives

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The IMF revised down its global growth forecast to 3.1% for 2026 from the 3.4% projected in January, according to its recent World Economic Outlook report(pdf). Without the war, the IMF says global growth would have been revised upward due to strong technology investment and resilient productivity resulting from AI adoption.

The MENA region faces the most significant downgrade of 2.8 percentage points to a 1.1% growth rate in 2026, from a previous forecast of 3.9%, highlighting a hardening regional divide amid war.

** We’ll have a detailed breakdown of projections for the region in Friday’s issue, after the IMF releases its regional economic outlook.

IEA cuts oil demand outlook: The International Energy Agency (IEA) sharply reduced itsexpectations for oil demand in 2026, which it now sees contracting by 80k bbl / d this year as the war in the Gulf continues to pressure global supply. Roughly 13 mn bbl / d of daily supply have all but vanished from the market and oil-importing nations are “scrambling” to source barrels to cover their needs as the disconnect between physical barrels and futures grows wider.

Remember: Brent futures are hovering at around USD 100 / bbl, but those are futures contracts. If you actually want to buy a tanker full of oil? Physical crude oil prices are sitting at around USD 150 / bbl.

The damage to global crude production has been extensive and expensive: Six weeks of the war knocked out about 10% of global crude production, taking more than 80 facilities offline across refineries, transport hubs, and production sites. The casualty list includes Qatar losing 17% of its LNG export capacity after strikes on Ras Laffan, while Kuwait’s port facilities suffered significant damages, Bahrain’s 400k bbl / d Sitra refinery faces a multi-month recovery, and Abu Dhabi’s Ruwais refinery was also attacked. Iranian refineries, meanwhile, have been gutted by US and Israeli strikes.

Saudi Arabia is the lone outlier bright spot: Despite losing 600k bbl / d of capacity, the country has already restored half of that at the Manifa field, with Khurais expected to follow. The Kingdom also fully restored the 7 mn bbl / d pumping capacity of the East-West pipeline.

Signs of the times

#1- Inflation accelerates in Cairo + Muscat: Annual urban inflation in Egypt accelerated for the second consecutive month to 15.2% in March as the economy absorbed the first full month of the US-Israeli war with Iran, which saw energy prices surge and the EGP slump as portfolio investors pulled out and the cost of fuel imports went up sharply. The acceleration was driven by food and beverage prices, which account for the majority of the goods in Egypt’s CPI basket, as well as electricity, gas, and other fuel items. In Muscat, inflation accelerated last month to 3.6%, compared to 2.0% in February. The rising inflation comes on the back of higher transport, food and beverage, and restaurants and hotel prices.

#2- Sales at high-end brands in Dubai and Abu Dhabi dropped sharply in March as the Iran conflict hit what had been one of the industry’s fastest-growing markets, with declines of 30-50% y-o-y at luxury brands housed at the Mall of the Emirates, Reuters reports, citing a source familiar with the data. Even Abu Dhabi, which is typically more insulated and less tourism-reliant, saw sales at its ADGM-adjacent Galleria Mall fall by around 10% across the board.

Footfall tells the same story: Traffic at Mall of the Emirates fell around 15% in March, while the more tourist-heavy Dubai Mall saw visits drop by roughly half, according to two industry sources cited by Reuters.

In context: Around 60% of luxury spending in the UAE comes from tourists, according to Morgan Stanley. Knock-on effects from rising oil prices and disrupted supply chains could dampen retail appetite even further. Back in March, Bernstein analyst Luca Solca had told CNBC that a 50% dip in sales for the month would constitute a worst-case scenario.

Quick hits

Chinese construction giant CSCEC is looking to revive its repeatedly stalled USD 800 mn project to build 20k homes in Benghazi and kick off new housing developments in Libya.

Background: The project — the contract for which was initially signed in 2008 — is a relic from the pre-2011 era but has since faced several roadblocks and failed attempts at revival, including in 2013 and again in 2024. CSCEC has previously requested compensation for the costs it incurred from the project stalling.

Also worth noting:

• Russia wants to export grain, meat, and oil to Jordan
• Syria now has an exporters council

Data point

E-payments now account for 85% of all transactions in the Saudi retail industry, up 6% from last year. The value of e-payment transactions through national payment systems (including point-of-sale and e-commerce transactions) climbed nearly 16% year-on-year to SAR 14.6 bn in 2025.