Brent crude dropped below $88 a barrel on Thursday, snapping a six-session rally as investors turned their attention from supply risks around the Strait of Hormuz to signs of softer demand. The International Energy Agency lowered its global oil demand outlook, saying the prolonged Middle East conflict and higher prices are increasingly weighing on consumption. At the same time, the agency said the global oil market could face a supply shortfall (when demand exceeds available supply) of 1.8 million barrels a day this quarter, more than double its previous forecast, while supply in July was still 6.3 million barrels a day below year-earlier levels. U.S. crude inventories also climbed sharply, rising 17.4 million barrels last week for the biggest weekly increase since January 2023. Diplomatic efforts between the U.S. and Iran to end the conflict and reopen the Strait of Hormuz have made little headway, with attacks on shipping continuing and rhetoric intensifying. Even so, Brent was still nearly 5% higher for the week after Thursday's pullback.