How global oil supplies have readjusted to help fill the huge gap left by the Strait of Hormuz shock

Global energy markets have been contending with their largest supply disruption in history resulting from the near closure of the Strait of Hormuz, a vital artery for oil and gas shipments to reach global markets. The cumulative oil supply losses from producers in the Middle East now exceed 1.3 billion barrels, with flows through the Strait of Hormuz falling from around 20 million barrels per day prior to the conflict to an average of 2.7 million barrels per day in March, April and May.

Since the start of the war in the Middle East on 28 February, the huge drop in the number of tankers shipping oil and gas from Gulf producers through the Strait of Hormuz has severely dislocated oil market flows, not only for crude oil, but also for petrochemical feedstocks, liquefied petroleum gas (LPG) for cooking, and middle distillates such as diesel and jet fuel. As the crisis intensified in early April, the North Sea Dated international crude oil benchmark reached an all-time high of $144 per barrel – more than double its pre-war levels, with even steeper gains recorded for jet fuel and diesel.

Prices have since eased significantly as demand has fallen sharply, and on increased optimism that a deal would be reached to enable more regular shipping flows through the Strait. The new agreement last week between the United States and Iran, which aims to reopen the Strait and provide the foundation for a lasting peace, is a crucial breakthrough on this front, with signs of exports already increasing since the deal was agreed.

The supply disruptions and price spikes to date have prompted a wide range of responses by oil producers, refiners and consumers to adapt to the radically changed market conditions. Many consumers have scaled back their energy use and governments have taken steps to shelter households and businesses from the impacts, especially in the Asia-Pacific region where the effects have been felt most acutely. The IEA’s flagship Oil Market Report now estimates that global oil demand will drop by almost 5 million barrels per day in the second quarter of 2026 year-on-year, and by 1.1 million barrels per day on average for the full year. That compares with the forecast in February, before the outbreak of hostilities, of global demand growth of 850 000 barrels per day for the full year.

In practice, the declines in demand have been much lower than the major losses of oil flows come through the Strait. Three other adjustments and responses have been crucial. First, there were large releases from stocks as oil prices incentivised market participants to draw down inventories at record rates, and the IEA’s largest ever release of emergency stocks brought additional barrels to market. On average, global oil inventories have fallen by 3.8 million barrels per day since the start of the conflict. Second, there have been key responses on the supply side, including the use of alternative routes to market for some Gulf producers that bypassed the Strait, and a surge in crude exports from other suppliers, most notably the United States. Lastly, the global refining system made rapid adjustments to compensate not only for losses of Middle Eastern crude oil, but also for the collapse in exports of refined products from the region.

The global oil market went into this crisis with significant buffers. In February, before the outbreak of hostilities, the IEA’s market balances indicated a surplus of 3.7 million barrels a day for 2026 as a whole.

Global oil supply had been running ahead of demand for 12 months, with the amount of oil in storage reaching 8.2 billion barrels. China, notably, had for many months been hoovering up huge amounts of oil imports and putting them in storage. This, combined with demand reductions both by refiners and end-users enabled China to slash crude oil imports by 40% – or 4.6 million barrels per day – between February and May, helping significantly to ease wider pressures in the global market.

When the flow of oil tankers through the Strait of Hormuz plummeted in early March, the massive global surplus that had built up over the past year gave oil markets a valuable cushion from immediate impacts.

As the severity of the situation became clear in the early days of March, IEA Member countries moved quickly – within two weeks of the start of the conflict – to reach a unanimous agreement to carry out the largest ever release of their emergency oil stocks – 400 million barrels – to help offset the disruptions.

Given the scale of the loss of oil supply from Gulf countries through the Strait of Hormuz, it was clear that the oil market surplus would provide only a limited buffer. Some economies in Asia – normally the destination for the vast majority of the oil and gas that flows through the Strait – had begun to feel the impacts of the crisis very quickly. And while overall oil market balances showed a major surplus on a global level going into the war, markets for some individual oil products – such as diesel and jet fuel – were tighter and more vulnerable to disruptions to flows through the Strait.

The IEA collective stock release ramped up steadily in the weeks after it was announced by the IEA Executive Director, with countries in the Asia-Pacific region moving first to release stocks to address immediate strains in the region, and other regions following suit. In May, the collective action was bringing 2.5 million barrels per day of additional oil to market. However, as the IEA Executive Director has repeatedly made clear, the emergency stock release is a short-term measure to counter disruptions – not a lasting solution. The single most important solution, he emphasised, is the full and unconditional re-opening of the Strait of Hormuz to regular and unimpeded shipping flows.

Some of the major oil producers in the Middle East showed impressive agility in responding to the effective closure of the Strait of Hormuz. Saudi Arabia rapidly ramped up crude oil flows through its East-West pipeline for export via the Red Sea port of Yanbu. Its oil exports from Yanbu increased from 2 million barrels per day before the outbreak of the war to more than 5 million barrels per day in early June. Saudi Arabia also boosted deliveries from stocks held overseas.

In parallel, the United Arab Emirates (UAE) has drawn on an array of storage, pipelines and other infrastructure, as well as alternative shipping routes, to deliver a relatively high level of exports even amid the severe disruptions. It has a pipeline that runs 380 kilometres from the production hub of Habshan and bypasses the Strait of Hormuz to Fujairah, a port on the Gulf of Oman, enabling it to export 1.8 million barrels of crude oil a day. The 42-million-barrel Mandous underground storage complex near Fujairah has given it additional flexibility. Since April, the UAE has also been ramping up exports through the Strait of Hormuz along the Omani coastline with tankers’ transponders turned off to avoid detection. This has helped increase the UAE’s total oil exports to 4.3 million barrels per day in early June – up from 1.9 million in March – taking them to almost 85% of their pre-war levels.

Recent tender announcements by the UAE, Kuwait and other producers point to a new normal of transit activity through the Strait along the Omani coast that may allow countries in the Gulf to draw down stocks built after the start of the war and facilitate the restart of some fields that had been shut down earlier in the conflict.

The nimble supply response has not been limited to Gulf producers contending with the de facto closure of the Strait of Hormuz. The crisis has set in motion major shifts in global oil trade flows, including significant increases in supplies from producers outside the Middle East being shipped from the Atlantic Basin to markets in Asia. The surge in Atlantic Basin oil exports has been underpinned by higher output from a number of producers in response to the crisis. The biggest gains have been seen in the United States, Kazakhstan, Brazil and Venezuela.

The increases in oil shipments from the United States to international markets have been the most remarkable. Total crude and petroleum product exports from the United States surged to a record high of 13.1 million barrels in May, up by nearly a quarter from the same month a year earlier. The crude exports were supported by higher production, as well as the drawdown of industry and government stocks, providing significant support for global supplies amid the turmoil.

The Middle East ranked as the world's largest source of aviation fuel to international markets in 2025, so the effective closure of the Strait of Hormuz at the end of February removed a significant share of global jet fuel supply from the market. The impact in importing regions has been most acute in Europe, which sourced the majority of its jet fuel imports from the Middle East.

Alternative suppliers have moved quickly to fill the gap. Refiners in the United States have produced record amounts of aviation fuel in response to the crisis, while European jet fuel yields surged to a record high. These changes significantly eased concerns over jet fuel supply shortfalls ahead of the peak summer travel season. The United States flipped from a net importer of jet fuel in April 2025 to net exporter in early 2026, as strong refinery runs and yields pushed jet fuel output higher. West African exports of jet fuel nearly doubled compared with the preceding three-month average – driven largely by a ramp-up at Nigeria's Dangote refinery.

Given that Europe’s jet fuel demand is rising towards its summer peak of 1.8 million barrels per day, and even with imports increasing from the low levels of April and May in line with the seasonal trend in recent weeks, the surge in jet fuel output from European refineries will need to be maintained over the coming months to avoid excessively tight market conditions developing.

The supply-side actions outlined in this commentary have provided crucial additional barrels to international oil markets to mitigate the largest supply disruption in history. Producers and many other market participants showed remarkable agility and ingenuity, often in extraordinarily testing circumstances. This is testimony to the resilience and resourcefulness of the global oil industry, which has weathered a string of crises and bouts of extreme market turmoil over the past two decades.

At the same time, global oil stocks have been depleting at a record pace, just ahead of the peak summer demand season. The available levers for increasing supply have dwindled. As the IEA Executive Director cautioned in late May, markets risked entering a “red zone” in July and August without the full reopening of the Strait of Hormuz. In this context, the new agreement between the United States and Iran last week came at a critical moment for oil markets.

The situation nonetheless remains highly unpredictable, with major strains in large parts of the market and uncertainty over how the peace talks will play out. Even if the reopening of the Strait proceeds successfully, as we and many others sincerely hope, the Middle East conflict will leave lasting marks on the global energy sector. The crisis of the past four months is already prompting countries around the world – producers and consumers – to review their energy strategies and policies. Companies and governments are contending with key decisions on investments, infrastructure projects, trade partners, supply routes, fuels and technologies are already happening. The effects will be significant and enduring.