Oil Market Adjusts to Enduring Hormuz Disruptions
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Oil Market Adjusts to Enduring Hormuz Disruptions
- The oil market is now factoring in a prolonged crisis in the Strait of Hormuz, with crude oil benchmarks stabilizing around $90 a barrel, which is approximately 50% higher than at the beginning of 2026.
- This shift comes nearly six months after a conflict erupted between the U.S. and Iran on February 28, 2026, leading to significant disruptions in a critical global oil chokepoint.
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The global oil market is increasingly adapting to the expectation that disruptions in the Strait of Hormuz will be long-lasting rather than a temporary shock. This strategic waterway, vital for global energy trade, has seen significant restrictions since February 28, 2026, following an air war launched by the United States and Israel against Iran. In retaliation, Iran’s Revolutionary Guard Corps (IRGC) blocked passage, attacked merchant ships, and laid sea mines.
Before the conflict, approximately 25% of the world’s seaborne oil trade and 20% of liquefied natural gas (LNG) passed through the Strait of Hormuz. By March 2026, global oil supply had crashed by 10.1 million barrels per day (mb/d) due to attacks on energy infrastructure and restrictions on tanker traffic. Oil prices surged, with Brent crude surpassing $100 per barrel on March 8, 2026, for the first time in four years, reaching a peak of $126 per barrel.
Despite an interim ceasefire agreed on June 17, 2026, which has since collapsed, hopes for a diplomatic resolution have faded. The stalemate has forced traders to price in persistent shipping restrictions. While crude prices have retreated from their initial peaks, they remain elevated, with Brent crude at $91.07 a barrel and West Texas Intermediate at $84.99 as of August 18, 2026. This indicates that the market is no longer anticipating a swift return to normal.
The economic impact is mounting, with global observed oil stocks falling by 2.4 million barrels per day in the second quarter, the largest quarterly draw in at least a decade. The International Energy Agency has cut its forecast for global oil demand in 2026 by 1.6 million barrels per day. Shipping costs have also dramatically increased; benchmark rates for very large crude carriers from the Middle East to China surged to $490,000 per day in August 2026, nearly ten times higher than at the start of the year.