Anxiety over continued and damaging supply disruption, due to the escalation of the conflict between the US and Iran, is significantly higher. The uptrend continued yesterday as Houthi rebels launched ferocious attacks on four Saudi cities and energy installations, including the Jazan refinery, causing 73 injuries. In a clear widening of the regional conflagration, Saudi warplanes launched retaliatory strikes on Yemen. Attacks have intensified overnight. The US reportedly destroyed five Iranian oil tankers as the Iranian Revolutionary Guard Corps targeted a US base in Jordan and tried to hit a US warship. Whatever the narrative is, this is war with all the consequences on regional supply and exports.

Traffic through the Strait of Hormuz remains severely constrained. Goldman Sachs estimates that around 35% of pre-war product exports are transiting the strait. Investment banks, in a clear sign that they remain gloomy about any potential build-up in global oil inventories, revised their oil price forecasts upwards for the rest of the year. There was a speed bump in the rally yesterday afternoon, triggered by reports of a telephone conversation between Vladimir Putin and Donald Trump, with the latter expressing a desire to end the Ukrainian conflict promptly, although there is no imminent prospect of a protracted truce. This retreat from the day's peaks, therefore, was correctly taken at face value, meaning that neither of the geopolitical hotspots offers the prospect of swift de-escalation and the price ascent has resumed. Inflationary pressure will affect oil demand, but for now supply is not able to match demand. Bet against a break above the magical $100/bbl barrier is at your peril.
In the Spotlight Again
The Middle East conflict, and to a lesser extent the Ukrainian crisis—now in its fifth year—continues to reverberate through global politics, economics, trade, and ultimately the supply–demand balance in the oil market. Politically, it has helped give rise to extremist views and parties. Economically, inflation remains elevated globally, including in the developed world. Supply chains are disrupted, and as trade protectionism rises, tensions between adversaries and even allies are reignited in the name of national security. One need look no further than China’s attempt to export its way out of sputtering domestic economic growth, a strategy that is being met with fierce resistance from countries seeking to protect their own industries.

Some of the impacts are ironic. The US administration is an avid supporter of the fossil fuel industry, yet its unilateral—or more accurately, bilateral—intention, together with Israel, to replace or remove the Iranian regime clearly accelerates the adoption of alternative energy. This is, in fact, a logical consequence of the prolonged closure of the Strait of Hormuz, which forces energy importing countries to strengthen their focus on energy security. The IEA’s amendment to this year’s Global EV Outlook, released a little over a month ago, aligns with this trend.

Although the energy watchdog of OECD nations concludes that consumer responses and policy implementation may lag as the conflict evolves, the geopolitical upheavals are expediting change in the global car market. The report, as the authors emphasise, is an update to the original paper published in the second quarter of the year.

The broader picture shows that the global car market, which grew almost uninterruptedly until 2017—after which sales began to gradually decline—registered sharp falls during the 2020 Covid 19 health crisis. From 2021, however, growth resumed solely due to the increasing popularity of electric and hybrid cars. More recently, during the first half of 2026, global car sales came under renewed pressure, and for the full year they are expected to record a year on year decline, predominantly due to falling sales in China and the US. In China, the Passenger Car Association envisages an annual fall of 14%, while in the US total car sales are expected to retreat by 3% from 2025.

Although global car sales are projected to decline, the IEA estimates that electric car sales increased in more than 90 countries in the first half of 2026 compared with the same period in 2025. Notwithstanding this impressive progress, a 20% plunge in Chinese electric car sales means the global figure is still expected to be lower than last year. The silver lining, however, is that despite the global decline, the share of electric car sales rose from 24% to 25% between 1H 2025 and 1H 2026, while in China the ratio reached 60%, up from 55% in 2025. Europe was also a bright spot: electric car sales in January–June 2026 exceeded the same period in 2025 by a remarkable 30%.

Another clear trend is China's growing role in global traditional and electric car export markets. To offset the impact of falling domestic sales, Chinese car exports surged by 65% in the first half of 2026, a clear source of tension between the EU and the world’s second largest economy, as the market share of traditional European carmakers continues to plummet. The picture is even more dire for Europe in electric cars, where Chinese export growth reached 120% in the first half of 2026. The displacement of internal combustion engines now appears irreversible; only the speed of the transition remains up for debate. Although the latest update contains no reference to gasoline displacement, it is worth recalling that in the original Global EV Outlook 2026, published in May, the IEA estimated that EVs—not just electric cars—will cut combined global gasoline and diesel demand by as much as 9 mbpd by 2035 under the Current Policies Scenario, and by 10 mbpd under the Stated Policies Scenario.

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