A supply disruption in the Strait of Hormuz has resulted in losses equivalent to 1 billion barrels, and tight inventories in Asia are driving oil prices higher.

Overview

This report examines the profound implications of potential disruptions to shipping through the Strait of Hormuz and the Red Sea on the global oil market, amid the ongoing U.S.–Iran conflict. While markets initially remained relatively calm, the sharp decline in Asian imports and the accelerated drawdown of global inventories are tightening supply–demand dynamics to an extreme degree. The report warns that if the conflict persists and leads to a prolonged closure of the strait, oil prices will face heightened upward pressure, prompting an upward revision of the 2026 oil price forecast.

Core views

The supply side has suffered a severe blow, with cumulative losses reaching 1 billion barrels. From March 1 to April 30, the volume of liquid flows through the Strait of Hormuz and the Red Sea declined by 16.4 million barrels per day, equivalent to roughly 1 billion barrels of lost supply. Real-time data indicate that conditions have not improved significantly since the conflict began, with only a handful of fully loaded tankers attempting to depart. This disruption has triggered a cascade of effects: Gulf exports have ground to a halt, Asian imports have weakened, floating storage is being drawn down, and pressure on shipping routes—already strained by insecurity in the Red Sea—has intensified further. Asia has served as the primary buffer, but inventory pressures have surged. The most substantial adjustment has come from a decline in Asian imports. Over the same period, Asia’s oil imports fell by 422 million barrels (roughly 7 million barrels per day), absorbing much of the physical displacement. However, this buffering has come at the expense of inventories. Vietnam, South Korea, and Thailand are among the hardest hit, with implied inventory‑cover ratios below 70 days and import volumes down by more than 20% compared with pre‑conflict levels. India has also borne a significant impact, with inventory drawdowns accounting for approximately 33% of its pre‑conflict stockpiles. By contrast, China and Japan, benefiting from larger inventory bases, remain in a relatively favorable position. Recent data suggest that the pace of the decline in Asian imports is accelerating; over the past 10 days, year‑on‑year reductions have expanded from 5 million barrels per day to 10 million barrels per day, signaling an accelerating depletion of stored supplies. European and U.S. inventories are also being rapidly depleted, with increased U.S. production providing some support. OECD inventories have played a pivotal role, declining by about 1 million barrels per day, underscoring the growing importance of onshore stock adjustments. Based on weekly data, OECD commercial inventories are estimated to have fallen by roughly 45 million barrels in April—the largest monthly drawdown in recent years. Meanwhile, crude oil supplies in the Americas have risen by 2.4 million barrels per day, largely driven by U.S. exports, which has helped ease global supply‑demand imbalances and limit the immediate magnitude of spot‑price deficits. In addition, an estimated 3.6 million barrels per day (or 222 million barrels) remains unaccounted for, likely reflecting reduced sanctioned oil flows, withdrawals from non‑OECD inventories, and releases from the Strategic Petroleum Reserve (SPR). Oil price forecasts have been revised upward to $90 per barrel, with geopolitical risks remaining the key uncertainty. Based on current supply‑and‑demand dynamics, the report projects an average Brent crude price of $90 per barrel in 2026. Quarterly breakdowns are as follows: $81 in Q1, $100 in Q2, $90 in Q3, and $85 in Q4. This outlook assumes that the Strait of Hormuz will reopen in time during the second half of the year, allowing Gulf crude to re‑enter the market. Should the reopening be delayed, the loss of Middle Eastern supply would continue to be offset through lower Asian imports, further inventory drawdowns, and demand destruction, leading to tighter physical markets and greater upside potential for spot prices than under the baseline scenario.

Analysis framework

Institutions have adopted an analytical framework that combines a supply‑demand balance sheet with inventory tracking. First, they quantify the direct supply losses stemming from geopolitical events—using traffic data from the Strait of Hormuz. Second, by disaggregating global oil flows across key components—Asian imports, floating storage, OECD inventories, Americas supply, and untracked items—they construct a detailed supply‑demand waterfall diagram to assess how the market absorbs this 1‑billion‑barrel shortfall. Finally, leveraging high‑frequency weekly data—such as U.S. EIA figures—as leading indicators, they infer monthly changes in OECD inventories and, drawing on historical correlations between inventories and prices, project future oil price trajectories. This approach underscores the critical role of inventory levels as a leading indicator of price movements, particularly during periods of supply opacity.

Methodology notes

• Industry/ Sector Analysis FrameworkSupply-and-Demand Framework

  Global Oil Supply-Demand Balance Analysis

  Research reports assess market tightness by comparing aggregate supply—comprising OPEC output, non-OPEC production, and inventory drawdowns—with aggregate demand, thereby calculating surpluses or deficits. This forms the core pricing logic for commodities: when supply falls short of demand, inventories must be depleted or demand curtailed to restore equilibrium, driving prices higher.

• Industry/ Sector Analysis FrameworkInventory cycle (Kitchin)

  Inventory serves as a price buffer and a leading indicator.

  The research report focuses on tracking changes in OECD commercial inventories and floating storage at sea. In the early stages of supply disruptions, inventories serve as a buffer, masking underlying shortages; however, once stock levels fall to critical thresholds—such as 1–2 months’ supply in certain Asian countries—their price-supporting effect diminishes, leading to a marked increase in price volatility.

• Valuation MethodologyOthers

  Scenario Analysis

  The research report outlines a “base-case scenario” (with the Strait reopening on schedule) and a “risk scenario” (with a delayed reopening), each projecting distinct oil-price trajectories. This approach enables investors to assess the potential range of impacts that key uncertainty factors—such as the timing of a geopolitical resolution—may have on asset prices.

Key data

• Reduced traffic through the Strait of Hormuz16.40 million barrels per dayFrom March 1 to April 30, cumulative supply losses amounted to approximately 1 billion barrels.
• Asia’s imports have declined.7 million barrels per dayYear-to-date cumulative reduction of 422 million barrels, which constitutes the primary source of the adjustment.
• OECD inventory monthly decline45 million barrelsApril’s data are expected to reflect one of the largest monthly declines in recent years.
• 2026 Brent Crude Oil Average Price ForecastUS$90 per barrelQ1: $81, Q2: $100, Q3: $90, Q4: $85
• Vietnam’s inventory coverage days< 70 daysAt the current rate of consumption, only about one month’s supply may remain.

Impact & implications

For the oil market, the current lull is underpinned by rapid inventory drawdowns—a dynamic that cannot be sustained. As Asian inventories approach critical thresholds, any further supply disruptions or resilient demand will translate directly into upward price pressure. For Asian economies reliant on Middle Eastern crude—such as Vietnam, South Korea, and Thailand—the risk of energy rationing and rising costs looms. From an investor perspective, a higher oil-price floor bodes well for the earnings outlook of upstream exploration and production firms, while simultaneously heightening cost pressures on downstream refining, petrochemical, and transportation sectors. The timing of geopolitical resolutions will serve as the key catalyst in shaping oil-price dynamics in the second half of the year.

Risks

• The reopening of the Strait of Hormuz has been delayed beyond expectations, prolonging the supply disruption.
• Inventory depletion in Asian countries has been faster than expected, raising the risk of acute rationing.
• In non-OECD countries, the opacity of strategic reserves and implicit inventory data may lead to misjudgments about the true tightness of the market.
• The global macroeconomic downturn has led to a sharper-than-expected decline in oil demand, thereby offsetting the impact of supply shortages.

What to watch

• Oil tanker traffic through the Strait of Hormuz and developments in geopolitical negotiations.
• Official inventory data and import CIF volumes for major Asian countries, particularly Vietnam, South Korea, and Thailand.
• The OECD’s weekly changes in commercial inventories, particularly the pace of destocking in U.S. crude oil and refined product inventories.
• The changes in the Brent crude oil spot–futures price spread are monitored to gauge the degree of tightness in the physical market.