The near-total blockage of the Strait of Hormuz has cost global businesses an estimated $25 billion and erased 782 million barrels of oil supply since February 28, according to data from Kpler. The International Energy Agency now projects global oil supply will fall by 3.9 million barrels daily this year while demand drops by only 420,000 barrels daily. "At some point the market is going to collide and prices are going to shoot up," Ellen Wald, senior fellow at the Atlantic Council's Global Energy Center, told the Wall Street Journal.
Kpler reported earlier this month that cumulative supply losses from the Middle East had reached 782 million barrels as of May 8 and were on track to hit 1 billion barrels by the end of May. The daily production numbers paint an even starker picture. Saudi Arabia is losing over 3 million barrels daily.
Iraq is down 2.88 million barrels daily. Iran has lost 1.69 million barrels daily. Kuwait's output fell by 1.75 million barrels daily.
The math does not add up. The IEA's latest monthly report estimates total global supply will drop by 3.9 million barrels daily this year. That figure is far below the actual 10.5 million barrel daily loss currently hitting the Middle East.
Demand destruction remains minimal. The IEA expects consumption to fall by just 420,000 barrels daily. The gap between vanishing supply and stubborn demand is widening by the week. "You can only decrease consumption so much, and when inventories run out, they are going to run out," Wald said.
Her warning echoes Amin Nasser, chief executive of Saudi Aramco. He told the Financial Times that global onshore fuel inventories are depleting at record speed. These stockpiles are "the only buffer that is available today," Nasser said.
They are "materially depleted."
Here is what they are not telling you. Nasser pointed to a critical distortion in how markets assess remaining oil stocks. Not all barrels counted as being in storage are actually accessible. "The rest is locked up in pipeline fill, minimum tank levels and other day-to-day operational constraints," he said.
Even the oil that is reachable cannot be withdrawn at will. "In Europe and the US, the maximum you can pull out from there is 2 million barrels a day," Nasser added. JP Morgan's commodity analysts delivered their own stark assessment. By next month, commercial oil inventories in the developed world could "approach operational stress levels," the bank's team told the Financial Times.
Natasha Kaneva, JP Morgan's head of global commodities strategy, said the only path to avoiding a full-blown shortage is a swift end to the war. "Our conclusion is that one way or another the strait reopens in June," she said. If that deadline passes without resolution, the crisis will mutate. "The next phase of this shock may look less like a traditional crude spike and more like a refining and end-user fuel crisis."
Kaneva was explicit about what would calm markets. Only a "clear, credible announcement, ratified and confirmed by both sides" would suffice. Anything short of that leaves the global economy exposed to a breakdown in fuel availability that few current models are pricing in.
Kpler's inventory data shows cumulative draws from onshore storage at 60 million barrels since late March. That leaves roughly 3 billion barrels still in storage. But Nasser's warning about inaccessible volumes means the real cushion is far thinner than the headline number suggests.
Every day the Strait remains blocked, more barrels must be drawn from storage. No supply is arriving to replenish them. Traders have shifted from panic to scarcity management. "The urgent, immediate grab for physical cargoes has died down," Hamad Hussain, commodities economist at Capital Economics, told the Wall Street Journal.
But the calm is deceptive. "We are drawing down those stocks pretty quickly, and as a result, prices will have to rise as a direct consequence of that."
The $25 billion cost to global businesses is not an abstract figure. It reflects disrupted shipping contracts, canceled refinery runs, and surging insurance premiums for any vessel still navigating Gulf waters. Follow the leverage, not the rhetoric.
The parties controlling the Strait hold a choke point through which roughly one-fifth of global oil consumption normally passes. That leverage is now being exercised daily. The current crisis rewrites energy assumptions that held just three months ago.
Before the war began, analysts predicted a severe oil glut. The IEA had forecast supply could exceed demand by nearly 4 million barrels daily. Global oil stocks sat at record highs.
Those projections have been shredded. The IEA now says demand will exceed supply this year. Aramco's Nasser added another layer of concern.
Traders may be overestimating how much oil can be physically moved from storage to refineries in a given day. The 2 million barrel daily withdrawal limit he cited for Europe and the US sets a hard ceiling on how quickly the world can compensate for the Middle East outage. That ceiling sits far below the actual daily supply loss.
The refining sector faces particular strain. Kaneva's warning about a refining and end-user fuel crisis points to a specific vulnerability. Crude oil in storage does not help if refineries cannot process it into the gasoline, diesel, and jet fuel that economies actually run on.
A bottleneck at the refinery gate would translate directly into shortages at the pump. Why It Matters: A prolonged Strait of Hormuz closure would force governments to impose fuel rationing, trigger emergency releases from strategic petroleum reserves that are themselves finite, and push oil prices to levels that historically precede global recessions. The last time a comparable supply disruption occurred—the 1973 Arab oil embargo—the world economy entered a deep downturn.
This time, the daily supply loss is larger in absolute terms. The key variables to watch are narrowing. JP Morgan's June deadline for the Strait's reopening is now the market's focal point.
If diplomatic channels fail to produce a credible ceasefire by then, the transition from inventory drawdown to physical shortage becomes the base case. Nasser's distinction between reported and accessible inventories will matter more with each passing week. - Aramco's CEO warns that only a fraction of reported global oil inventories is actually accessible, with withdrawal limits of 2 million barrels daily in Europe and the US. - JP Morgan analysts say commercial inventories could hit operational stress levels by next month unless the Strait of Hormuz reopens. Diplomatic efforts to reopen the Strait remain the single variable that could reset the entire outlook.
Partial deals or unverified ceasefires will not restore confidence. The market is now pricing in a binary outcome: a verified reopening in June, or a fuel crisis that moves from refineries to end users by mid-summer. Governments in import-dependent economies are already running the numbers on strategic reserve drawdowns.
Those reserves are the last line of defense. They were not designed to backstop a months-long closure of the world's most critical energy chokepoint.
Key Takeaways
— Global oil supply losses from the Middle East have reached 782 million barrels since February 28, with Saudi Arabia alone losing over 3 million barrels daily.
— Aramco's CEO warns that only a fraction of reported global oil inventories is actually accessible, with withdrawal limits of 2 million barrels daily in Europe and the US.
— JP Morgan analysts say commercial inventories could hit operational stress levels by next month unless the Strait of Hormuz reopens.
— The IEA now expects demand to exceed supply this year, reversing pre-war forecasts of a 4 million barrel daily surplus.
Source: OilPrice.com
