TEHRAN- Oil prices set to surge above $105 a barrel as US-Israeli strikes trigger historic supply shock, demand set to shrink for first time since pandemic.

Global oil stockpiles are collapsing toward their lowest levels in two decades following the US-Israeli military attack on Iran, the US Energy Information Administration warned on Tuesday, as the full scale of the economic fallout from the assault on the Islamic Republic becomes clear.

Total oil inventories in the world's largest economies are set to fall to just under 2.3 billion barrels by December, the EIA said, reaching levels not seen since the agency began keeping records in 2003. The devastating strike on Iranian facilities and the subsequent closure of the Strait of Hormuz – a chokepoint through which 20 percent of global oil shipments pass – has wiped out 11 million barrels of West Asian output every day.

The waterway is unlikely to return to pre-conflict operations until early 2027, the agency said, condemning consumers and businesses to years of painfully high energy costs.

Global benchmark Brent crude is expected to average $105 a barrel through June and July on the spot market, the EIA said – a staggering premium over Tuesday's futures price of $91.60. But analysts warn the worst is yet to come, as the relentless drawdown of inventories "creates the foundation for a sharp increase in oil prices in the months ahead".

In a rare and alarming reversal, the EIA now expects global oil demand to shrink this year by 1.1 million barrels per day – the first contraction since the pandemic-induced collapse of 2020. Just months ago, the agency had forecast demand growth of 200,000 barrels per day.

The revision reflects the brutal reality of high prices, shrinking fuel availability, and government rationing measures now being imposed across multiple economies.

"Because of the size of the drawdown in global inventories, we forecast that oil prices will remain elevated until global oil flows return to normal levels and oil inventories are replenished," the agency said.

For ordinary citizens, that translates into mounting pain at the petrol pump, rising heating bills, and escalating costs for food and goods transported by road, sea and air. The attack on Iran – and the wider conflict it has ignited – is now reverberating through every major economy on earth.