At first glance, global oil markets appear to have absorbed the disruption caused by the closure of the Strait of Hormuz better than expected. Oil prices have risen, but they have not reached the extreme levels many analysts initially feared. This apparent stability, however, may be temporary. According to the analysis, current prices reflect the presence of short-term buffers that are masking a much deeper supply problem.
The Strait of Hormuz is one of the world’s most important energy corridors. Before the conflict, roughly one-third of global crude oil trade passed through this route. The disruption therefore represents one of the largest oil supply shocks ever recorded. Under normal circumstances, a reduction of this scale could trigger severe economic consequences, including higher inflation, rising production costs and an increased risk of recession.
Several factors have prevented a sharper increase in oil prices so far. Some of these factors may provide longer-term relief. Saudi Arabia and the United Arab Emirates have redirected part of their exports through pipelines that avoid the strait. In addition, global oil markets entered the crisis with a small cushion, as production was slightly higher than demand, supported by growing output in countries such as the United States, Brazil, and Guyana. Together, these conditions have helped absorb part of the initial shock.
A second group of measures is far more fragile because it relies on finite resources. Some governments released hundreds of millions of barrels from emergency reserves, while oil previously stored on tankers by Russia and Iran entered the market. These actions temporarily increased supply and reduced pressure on prices. Yet such reserves cannot be replenished quickly and are designed only for short-term emergencies.
The central argument is that markets may be underestimating how rapidly these buffers are disappearing. Emergency stock releases are expected to run out during the summer, while floating storage reserves have already been largely depleted. Once these temporary protections vanish, the underlying gap between supply and demand will become much more visible. At that point, oil prices could rise sharply rather than gradually.
An especially important issue is market expectations. Current prices reflect a widespread belief that the disruption in the Strait of Hormuz will eventually be resolved. As long as traders expect a relatively quick reopening, prices remain somewhat contained. If confidence in a near-term solution weakens, markets may react suddenly, producing large and nonlinear price increases. In other words, the greatest risk may come not only from physical shortages but also from changing perceptions about how long the crisis will last.
The Brookings’ commentary estimates that crude oil prices could climb well above current levels if the disruption continues for several more months. Such increases would affect far more than fuel markets. Higher oil costs would likely spread through transportation, manufacturing, food production, and other sectors that depend on energy-intensive supply chains. Shortages of refined products such as jet fuel and petrochemical inputs could further amplify these pressures.
Underlying the discussion is a broader concern about global energy security. The crisis exposes how heavily the international economy still depends on a small number of strategic transport routes. Temporary reserves can delay the consequences of disruption, but they cannot eliminate structural vulnerabilities. The longer the blockage persists, the more difficult and costly adjustment becomes. What currently appears to be a manageable situation may therefore represent only the early stage of a much larger energy challenge.
Reference: Brooks, R. & Harris, B. (2026, May 22). The timing of the impending crude crisis. https://www.brookings.edu/articles/the-timing-of-the-impending-crude-crisis/