About 1 billion barrels of oil have been taken out of global supply since tanker traffic through the Strait of Hormuz stopped in late February. Governments released emergency stocks and airlines, refiners and other users have curbed fuel use as prices surged.

Supply gap and the use of buffers

The stoppage in the Hormuz shipping lane has removed at least 10% of physical supply from world markets, traders and analysts say, and a cumulative shortfall of about one billion barrels is now described as all but certain.

Governments moved quickly after attacks on Iranian targets, releasing emergency inventories to steady markets. Those buffers are being eaten through fast: the combined scale of stocks freed early on is now less than half the aggregate shortfall traders expect over coming weeks.

Gunvor Group put the immediate loss to global supply at several million barrels a day and warned it could double to about 5 million barrels a day next month. Other market participants estimate the current hole around 4 million barrels a day.

Mastheads

"About 600 million barrels haven't reached their expected destinations since the end of February," said Karen Young, senior research scholar at the Columbia University Center on Global Energy Policy and senior fellow at the Middle East Institute, in a public interview. "The deliveries are now not happening, and there aren't resupplies coming."

Where demand is already breaking

Demand reduction isn't confined to headline gasoline or jet fuel. Saad Rahim, chief economist at Trafigura Group, said demand destruction is occurring in less visible parts of the supply chain, notably:

  • Petrochemicals: about one-fifth of petrochemical feedstocks transit Hormuz; plants in Asia and the Middle East have curtailed runs or shut units.
  • LPG supplies: flows critical for cooking in parts of India and Southeast Asia have been squeezed, prompting local rationing or prioritisation.
  • Refined fuels: refinery-level prices have risen, feeding through to consumers; US retail gasoline briefly approached the equivalent of about US$4 a gallon in some reports.
  • Transport sectors: airlines have cancelled thousands of flights as fuel and routing costs climb; diesel shortages are pressuring trucking and construction.

Macro effects and recession risk

The International Energy Agency warned that global oil demand is on track for its biggest monthly slump in five years. Traders are weighing how sustained supply loss will mute growth in fuel‑intensive activities and lift costs across logistics chains.

Higher fuel prices act like a tax on households and businesses, first hitting transport and heating for consumers and raising input and distribution costs for industry. That reduces spending and investment.

Market participants flag a rising probability that lengthy disruption could trigger broader economic weakness. Gunvor and others see a growing risk of recession if the supply gap widens to projected levels. Credit and equity markets have already priced in higher energy risk premiums, while traders scramble to reroute shipments.

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"Demand destruction is happening in places that aren't visible pricing centres," said Saad Rahim, chief economist of Trafigura Group.

This article was created with AI assistance.