Crude Oil Crisis: When Supply Shock Will Hit Prices Global oil markets face a major test from the ongoing closure of the Strait of Hormuz amid conflict in Iran.
This disruption affects roughly one-third of global crude oil trade, yet Brent crude prices have not yet reached 2022 peaks. A new Brookings analysis explains why prices remain relatively contained for now—and warns that a sharper crisis could emerge by mid-2025 as temporary buffers run out.

The Strait of Hormuz normally carries about 15 million barrels per day (mb/d) of crude. Pre-conflict global crude trade totaled around 45 mb/d, making this the largest supply disruption in history. However, structural and temporary adjustments have softened the immediate blow.

Structural offsets include pipeline bypasses from Saudi Arabia and the UAE (adding ~5.7 mb/d of rerouted capacity) and a pre-war global supply surplus of about 0.7 mb/d from increased production in the Americas. These permanent adjustments help mitigate roughly 6.4 mb/d of the lost flows.

Temporary buffers have played an even bigger role in preventing price spikes so far. These include:

• IEA-coordinated emergency releases of over 300 million barrels of crude (providing ~2.5 mb/d for several months).

• Drawdowns of Russian and Iranian floating storage (tankers holding oil at sea), which offered short-term supply relief but are rapidly depleting.

According to the framework, markets are essentially in a race between these depleting buffers and expectations about how long the strait will remain closed. Price volatility reflects shifting views on the duration of the impasse: optimistic headlines cause prices to drop, while pessimistic signals drive them up.

Projections show temporary measures will largely exhaust by mid-July 2026. At that point, the net market adjustment could reach 7.1 mb/d—about 16% of global crude trade. Using historical price elasticities, analysts estimate Brent could climb toward $120 per barrel if markets anticipate a prolonged shortfall through June, and potentially near $150 if buffers fully deplete without resolution.

This situation highlights the fragile balance in oil markets. While structural changes provide some lasting relief, the exhaustion of inventories and floating stocks will force a larger supply-demand imbalance. Refineries may cut throughput, driving up costs for gasoline, jet fuel, and other products, with broader risks to the global economy.

Key Takeaways

• Structural buffers cushion the blow: Pipeline reroutes and pre-war surpluses permanently offset over 6 mb/d of lost Hormuz crude flows.

• Temporary relief is running out: Emergency stockpiles and floating storage will be largely depleted by mid-July 2026, widening the effective shortfall to ~7.1 mb/d.

• Price risk escalates with time: Prolonged closure could push Brent crude toward $120–$150/barrel as markets price in a deeper, longer-term deficit.

  brookings.edu

Original source: The timing of the impending crude crisis | Brookings (May 22, 2026).

25 minutes ago, connda said:

and warns that a sharper crisis could emerge by mid-2025 as temporary buffers run out.

2026 you ment