The continued closure of the Strait of Hormuz has severely disrupted crude oil supply.
2026-04-22 19:24:30
International oil prices remain highly volatile, with traders reacting to a series of confusing and often contradictory headlines, highlighting the deep-seated trust deficit between Iran and the United States. Despite the Trump administration extending the ceasefire agreement with Iran, keeping Brent crude prices below $100 a barrel, peace talks have stalled due to Iran's hardline stance—Iran has made it clear that it will refuse any negotiations under the continued US naval blockade. JPMorgan Chase predicts that this pressure could force Iran to cut oil production within 15 days.
More importantly, the de facto closure of the Strait of Hormuz has led to a sustained, severe, and potentially further disruption to crude oil transport. As one of the world's most important energy transport routes, the strait's blockade directly impacts the stability of the global crude oil supply chain. Furthermore, the mutual accusations and conflicting accounts between the US and Iran have fueled market uncertainty about future developments, exacerbating short-term volatility in oil prices.
Shrinking demand and inventory adjustments: key factors suppressing oil price increases in the short term.
Despite the severe blow to the supply side, the market has not experienced an uncontrollable surge in oil prices primarily due to shrinking demand and inventory adjustments by major consuming countries such as China. According to data from Vitol, a global commodities trading giant, the continuously rising prices of crude oil and fuels have triggered a contraction of approximately 5 million barrels per day in global crude oil demand, equivalent to about 5% of global daily crude oil consumption, significantly suppressing oil prices.
As the world's largest crude oil importer, China's market behavior has further amplified this effect. China has not only significantly reduced its seaborne crude oil purchases but also actively resold its existing purchases and utilized its massive strategic and commercial reserves—estimated to be between 1 billion and 1.2 billion barrels. These measures have effectively offset short-term import demand, keeping oil price increases within a certain range even with severely restricted transportation flows. However, it's important to note that this demand suppression and inventory adjustment are temporary and reversible, and cannot fundamentally change the market's supply-demand imbalance.
Meanwhile, the tight supply situation in the refined oil market fully reflects the market pressure. The continued shortages of diesel, aviation kerosene, and petrochemical raw materials, along with persistently high prices for these products, also indirectly confirm the potential tightness in the crude oil market.
Outlook: Even if the strait reopens, supply recovery will still face multiple obstacles.
The most pressing question in the market right now is: if the Strait of Hormuz is eventually reopened for a longer period, how will the market evolve? The answer is that even if the strait resumes navigation, the return of crude oil supply to normal levels will be a long and tortuous process, and it will be difficult to alleviate market tensions in the short term.
First, there are logistical bottlenecks. Currently, a large number of oil tankers are misaligned, causing severe disruption to the global crude oil supply chain. Recoupling loading and unloading ports for these tankers will take weeks. This means that a "reopening in principle" does not equate to an "immediate restoration of actual supply." Second, there is uncertainty regarding refining facilities. Some refineries in the Persian Gulf region may have been damaged in the conflict, and damage assessments have only just begun. The pace of refining capacity recovery will directly impact the stability of refined oil product supply.
In terms of production losses, global crude oil production has already decreased by more than 500 million barrels, and this figure could rise further to 1 billion barrels. Even if everything goes smoothly, it will take several months for production to fully return to normal, making the global crude oil market's supply and demand situation even more strained than before the conflict. It is estimated that this conflict could cause crude oil prices to bottom out by $10-15 per barrel compared to pre-war levels.
Furthermore, the recovery of upstream production also faces constraints. The prerequisite for the oil field to resume large-scale production is that the oil storage tank inventory is reduced to a reasonable level, and this process itself takes time; only then can oil wells be gradually restarted, and the restart progress will also be affected by the on-site conditions of the oil field and the extent of infrastructure damage, and the entire process may last for several weeks or even longer.
Impact on the refined oil market: The aviation industry is the hardest hit, and Europe faces a supply crisis.
The current relative stability in crude oil prices masks the dramatic fluctuations in the refined oil market. Since the outbreak of the conflict, jet fuel prices have more than doubled, and the global aviation industry is facing unprecedented fuel cost pressures. For example, Lufthansa plans to cancel approximately 20,000 flights between May and October, which could save about 40,000 tons of jet fuel, reducing fuel costs by about $60 million at current prices.
The jet fuel supply crisis is particularly severe in Europe. The International Energy Agency (IEA) warned that Europe's jet fuel stocks can only last for less than six weeks, prompting transport ministers from various European countries to hold an emergency meeting this week to discuss contingency plans. The continued tightness in the refined petroleum products market will not only drive up operating costs in industries such as aviation and logistics, but may also spread through the supply chain to broader economic sectors, triggering a new round of inflationary pressures.
Political maneuvering: Iran's internal power structure exacerbates uncertainty in negotiations.
From a political perspective, Iran's power structure adds further uncertainty to the negotiation process. The Supreme Leader remains the official core of power in Iran, holding ultimate control of the armed forces. However, recent developments indicate that hardliners within the Islamic Revolutionary Guard Corps (IRGC) are increasingly influencing operational decisions, particularly in strategic locations like the Strait of Hormuz.
This power structure presents a structural dilemma: external negotiators may reach a consensus with Iranian officials capable of facilitating an agreement, but its implementation requires the approval of the Supreme Leader's inner circle and the Revolutionary Guard. If hardliners choose to maintain their pressure stance, even a diplomatic agreement could face the risk of being weakened, delayed, or only partially implemented, further prolonging the impact of geopolitical risks on the oil market.
Conclusion: Short-term demand suppression cannot mask long-term tightness; upside risks to oil prices remain.
In summary, although the global crude oil market remains tight in terms of both supply and demand, short-term oil price movements are primarily influenced by market assessments of the true extent of supply disruptions, the degree of demand contraction, and investor sentiment and positioning. Weak demand has temporarily masked the severity of supply losses, but this masking effect is unlikely to be sustainable.
As inventories in countries like China gradually deplete and demand slowly recovers, coupled with multiple factors such as logistical delays, damage to refining facilities, and slow recovery of upstream production, the tight supply situation in the refined oil market will persist. If a US-Iran peace agreement fails to be reached soon and geopolitical risks continue to escalate, the crude oil market may face a new round of upward pressure. For investors, it is crucial to closely monitor key variables such as the progress of navigation in the Strait of Hormuz, internal power struggles within Iran, and the pace of global demand recovery, and to carefully assess market volatility risks.
More importantly, the de facto closure of the Strait of Hormuz has led to a sustained, severe, and potentially further disruption to crude oil transport. As one of the world's most important energy transport routes, the strait's blockade directly impacts the stability of the global crude oil supply chain. Furthermore, the mutual accusations and conflicting accounts between the US and Iran have fueled market uncertainty about future developments, exacerbating short-term volatility in oil prices.
Shrinking demand and inventory adjustments: key factors suppressing oil price increases in the short term.
Despite the severe blow to the supply side, the market has not experienced an uncontrollable surge in oil prices primarily due to shrinking demand and inventory adjustments by major consuming countries such as China. According to data from Vitol, a global commodities trading giant, the continuously rising prices of crude oil and fuels have triggered a contraction of approximately 5 million barrels per day in global crude oil demand, equivalent to about 5% of global daily crude oil consumption, significantly suppressing oil prices.
As the world's largest crude oil importer, China's market behavior has further amplified this effect. China has not only significantly reduced its seaborne crude oil purchases but also actively resold its existing purchases and utilized its massive strategic and commercial reserves—estimated to be between 1 billion and 1.2 billion barrels. These measures have effectively offset short-term import demand, keeping oil price increases within a certain range even with severely restricted transportation flows. However, it's important to note that this demand suppression and inventory adjustment are temporary and reversible, and cannot fundamentally change the market's supply-demand imbalance.
Meanwhile, the tight supply situation in the refined oil market fully reflects the market pressure. The continued shortages of diesel, aviation kerosene, and petrochemical raw materials, along with persistently high prices for these products, also indirectly confirm the potential tightness in the crude oil market.
Outlook: Even if the strait reopens, supply recovery will still face multiple obstacles.
The most pressing question in the market right now is: if the Strait of Hormuz is eventually reopened for a longer period, how will the market evolve? The answer is that even if the strait resumes navigation, the return of crude oil supply to normal levels will be a long and tortuous process, and it will be difficult to alleviate market tensions in the short term.
First, there are logistical bottlenecks. Currently, a large number of oil tankers are misaligned, causing severe disruption to the global crude oil supply chain. Recoupling loading and unloading ports for these tankers will take weeks. This means that a "reopening in principle" does not equate to an "immediate restoration of actual supply." Second, there is uncertainty regarding refining facilities. Some refineries in the Persian Gulf region may have been damaged in the conflict, and damage assessments have only just begun. The pace of refining capacity recovery will directly impact the stability of refined oil product supply.
In terms of production losses, global crude oil production has already decreased by more than 500 million barrels, and this figure could rise further to 1 billion barrels. Even if everything goes smoothly, it will take several months for production to fully return to normal, making the global crude oil market's supply and demand situation even more strained than before the conflict. It is estimated that this conflict could cause crude oil prices to bottom out by $10-15 per barrel compared to pre-war levels.
Furthermore, the recovery of upstream production also faces constraints. The prerequisite for the oil field to resume large-scale production is that the oil storage tank inventory is reduced to a reasonable level, and this process itself takes time; only then can oil wells be gradually restarted, and the restart progress will also be affected by the on-site conditions of the oil field and the extent of infrastructure damage, and the entire process may last for several weeks or even longer.
Impact on the refined oil market: The aviation industry is the hardest hit, and Europe faces a supply crisis.
The current relative stability in crude oil prices masks the dramatic fluctuations in the refined oil market. Since the outbreak of the conflict, jet fuel prices have more than doubled, and the global aviation industry is facing unprecedented fuel cost pressures. For example, Lufthansa plans to cancel approximately 20,000 flights between May and October, which could save about 40,000 tons of jet fuel, reducing fuel costs by about $60 million at current prices.
The jet fuel supply crisis is particularly severe in Europe. The International Energy Agency (IEA) warned that Europe's jet fuel stocks can only last for less than six weeks, prompting transport ministers from various European countries to hold an emergency meeting this week to discuss contingency plans. The continued tightness in the refined petroleum products market will not only drive up operating costs in industries such as aviation and logistics, but may also spread through the supply chain to broader economic sectors, triggering a new round of inflationary pressures.
Political maneuvering: Iran's internal power structure exacerbates uncertainty in negotiations.
From a political perspective, Iran's power structure adds further uncertainty to the negotiation process. The Supreme Leader remains the official core of power in Iran, holding ultimate control of the armed forces. However, recent developments indicate that hardliners within the Islamic Revolutionary Guard Corps (IRGC) are increasingly influencing operational decisions, particularly in strategic locations like the Strait of Hormuz.
This power structure presents a structural dilemma: external negotiators may reach a consensus with Iranian officials capable of facilitating an agreement, but its implementation requires the approval of the Supreme Leader's inner circle and the Revolutionary Guard. If hardliners choose to maintain their pressure stance, even a diplomatic agreement could face the risk of being weakened, delayed, or only partially implemented, further prolonging the impact of geopolitical risks on the oil market.
Conclusion: Short-term demand suppression cannot mask long-term tightness; upside risks to oil prices remain.
In summary, although the global crude oil market remains tight in terms of both supply and demand, short-term oil price movements are primarily influenced by market assessments of the true extent of supply disruptions, the degree of demand contraction, and investor sentiment and positioning. Weak demand has temporarily masked the severity of supply losses, but this masking effect is unlikely to be sustainable.
As inventories in countries like China gradually deplete and demand slowly recovers, coupled with multiple factors such as logistical delays, damage to refining facilities, and slow recovery of upstream production, the tight supply situation in the refined oil market will persist. If a US-Iran peace agreement fails to be reached soon and geopolitical risks continue to escalate, the crude oil market may face a new round of upward pressure. For investors, it is crucial to closely monitor key variables such as the progress of navigation in the Strait of Hormuz, internal power struggles within Iran, and the pace of global demand recovery, and to carefully assess market volatility risks.
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