Oil Inventories Plunge to Eight-Year Low as Hormuz Blockade Drains Global Reserves

Global oil inventories have crashed to about 101 days of expected demand, the lowest level in nearly eight years, with the rate of depletion so fast that it exposes the market to further shocks, according to Goldman Sachs analysts in a note carried by Reuters . With the Strait of Hormuz inaccessible for nearly all tanker traffic, these stocks could drop to as low as 98 days of demand by the end of May , the investment bank warned on Monday.

Shipping traffic through the Strait of Hormuz has been largely blocked by Iran since February 28, 2026, when the United States and Israel launched an air war against Iran. The Iranian Revolutionary Guard has issued warnings forbidding passage through the strait, has boarded and attacked merchant ships, and has laid sea mines . The U.S. has enforced a naval blockade on Iranian ports since April 13, telling at least 49 commercial ships to turn back, according to Central Command .

The dual blockade has created what the head of the IEA described as the "greatest global energy security challenge in history" . According to market data, WTI crude traded at $71.50 per barrel on Monday, up 0.6%, while Brent crude stood at $75.20 per barrel, up 0.5%.

California Drivers Face $6 Gas as Supply Crunch Hits West Coast

Californian retail fuel prices have hit $6.114 per gallon for the first time since 2023 amid the global supply crunch that has exposed the state's vulnerabilities, notably its dependence on foreign oil supply , OilPrice.com reported Monday. California sources close to a third of the crude oil it consumes from the Middle East .

On Thursday, the average gas price in California was $6.01, $1.71 higher than the national average of $4.30, according to AAA. After a small two-week decline, the national average surged 27 cents higher in just the past week. "The national average is $1.12 higher than it was this time last year, as oil prices surge above $100/barrel with no indication of when the Strait of Hormuz will reopen," AAA said in a news release .

The last tanker carrying crude from the Middle East region arrived on the California coast at the end of April, delivering 2 million barrels. No other tankers will be arriving anytime soon, as traffic through the Strait remains severely restricted , CBS reported.

Denton Cinquegrana, chief oil analyst at Dow Jones Energy, said "California is arguably the state most impacted by the Strait of Hormuz in the United States, which has been largely insulated from the events" .

U.S. Attempts to Force Open Critical Waterway

The U.S. military said it fired on Iranian forces and sank six small boats targeting civilian ships as it moved to reopen the Strait of Hormuz on Monday , NPR reported. The U.S. military said two American-flagged merchant ships had successfully transited the strait on Monday as part of a new initiative .

The United Arab Emirates, a key American ally, said it had come under attack from Iran for the first time since a fragile ceasefire took hold in early April. The UAE Defense Ministry said its air defenses had engaged 15 missiles and four drones fired by Iran. Authorities in the eastern emirate of Fujairah said one drone sparked a fire at a key oil facility, wounding three Indian nationals .

The US military's Central Command said it would support the effort with 15,000 military personnel, more than 100 land- and sea-based aircraft, warships and drones. "Our support for this defensive mission is essential to regional security and the global economy as we also maintain the naval blockade," Admiral Brad Cooper, CENTCOM commander, said in a statement .

Traffic through the Strait has been reduced to a trickle, with just 191 vessels recorded crossing in the entire month of April, according to Kpler data. Overall, traffic through Hormuz in the last two months has run at about 5% of the pre-war average, leading to shortages of refined products, especially in Asia , CNN reported.

Natural Gas Sector Sees Diverging Fortunes

While oil markets tighten, natural gas futures slipped in early Tuesday trading as comfortable supply and a sluggish near-term demand outlook weighed on sentiment , Natural Gas Intel reported. According to market data, Henry Hub natural gas traded at $3.25 per MMBtu on Monday, down 2.4%.

However, NextDecade is looking to capitalize on contracting momentum from the conflict in Iran to sanction Train 6 at Rio Grande LNG next year as demand for long-term US LNG supply strengthens , the publication reported Monday.

Antero Resources has seen more international buyers for its natural gas liquids volumes as they work to replace production that has been cut off by war in the Middle East , Natural Gas Intel reported. The company warned of potential propane shortages as global buyers scramble to secure NGLs.

With Qatar largely out of the picture, there's a global shortage of natural gas. That leaves an opening for the world's largest LNG exporter, the U.S. , NPR reported in April. The U.S. set a record for LNG exports in March. The U.S. LNG supply is forecast to grow by about 84% over the next five years, according to figures from S&P Global Energy .

Inventories Acting as Temporary Shock Absorber

JPMorgan analysts said in a report that "in this war driven oil shock, inventories have become the market's primary balancing mechanism. Unlike a typical disruption where spare production capacity can be mobilized quickly, the location of the shock and the scale of current supply losses mean the immediate adjustment has to come from barrels already in storage" .

The analysts warned that "floating storage can be tapped quickly, but only a slice of onshore inventories - around 580 million barrels - is readily accessible. The rest is effectively locked up in pipeline fills, minimum tank levels, and other operational constraints" .

JPMorgan estimated that "OECD commercial stocks could fall to these operational floors by September if the Strait of Hormuz remains closed, assuming demand destruction stabilizes at 5.5 million barrels per day" .

The shock of Hormuz closing is the biggest loss of oil in modern history. Fatih Birol, chief executive of the IEA, calls it "the greatest energy security crisis in history", insisting it is "more serious" than the previous energy shocks in 1973 , according to Economics Help.

The Financial Times reported that executives warn that a prolonged energy shock would increase pressure to pass on costs to customers , suggesting consumer pain may intensify if the crisis continues.