Oil markets strain as Hormuz closure cuts 14 m bpd supply

Global oil markets face a severe and prolonged supply crisis as the closure of the Strait of Hormuz enters its fourth month, depleting inventories and threatening to push fuel prices higher even if the vital waterway reopens. The disruption, stemming from conflict involving Iran, has removed an estimated 14 million barrels per day of Middle Eastern supply, creating what analysts describe as the largest oil supply shock in modern history.

The physical strain on the market is intensifying. Global oil inventories fell by over 250 million barrels between March and May, with stockpiles draining at a record pace. Officials warn that reserves are approaching critically low levels just as the Northern Hemisphere enters the peak summer travel season, which will increase demand. The International Energy Agency has cautioned that oil markets could enter a "red zone" in July or August if the situation persists.

While benchmark Brent crude oil prices, which briefly surged above $120 per barrel at the crisis's onset, have since retreated to the mid-$90 range on hopes of a diplomatic resolution, industry executives warn this optimism is disconnected from physical realities. Tom Baker, Vitol's...