The Strait That Won't Reopen

The strait's closure has cut off 20% of the world's oil supply for 94 days. That's longer than the 1973 Arab oil embargo. Longer than the 1990 Gulf War disruption. The International Energy Agency has characterized it as the "largest supply disruption in the history of the global oil market."

And it's not getting better. Only a handful of tankers are crossing each day compared to the normal 100 cargo ships that typically transit, with the strait remaining "essentially closed," according to Matt Smith, director of commodity research at Kpler. Brent crude traded at $75.20 per barrel Monday, up 0.5%, per market data. WTI gained 0.6% to $71.50. But those numbers mask a deeper crisis unfolding beneath the surface—one that has refiners celebrating record margins while the world's strategic oil reserves drain at unprecedented speed.

How Long Can the Buffer Last?

Morgan Stanley estimates global oil stockpiles dropped by about 4.8 million barrels a day between March 1 and April 25—far exceeding the previous peak for a quarterly drawdown in International Energy Agency data. Shell CEO Wael Sawan told investors the market faces "a hole of close to a billion barrels of crude shortage at the moment, either because of locked in barrels or unproduced barrels." And that hole deepens every day the strait stays choked.

The math is brutal. Iraq, Saudi Arabia, Kuwait, UAE, Qatar, and Bahrain collectively shut in 7.5 million barrels per day of crude oil production in March, with production shut-ins rising to 9.1 million barrels per day in April, according to the U.S. Energy Information Administration. To put that in perspective: 9.1 million barrels per day is roughly equivalent to removing all of Canada's oil production from global markets—permanently.

Fuel shortages could hit some import-dependent countries this summer, with critical shortages potentially starting "as we get into the June-July time frame," a ConocoPhillips executive warned. The U.S. Strategic Petroleum Reserve is already poised to fall to its lowest level since 1982 if the administration completes its promised release of 172 million barrels.

Who's Winning While the World Waits?

U.S. Gulf Coast refiners, that's who. Goldman Sachs forecast that refining margins will remain significantly higher throughout 2026, with the war in the Middle East pushing refiners' margins two to three times higher than the average for the period from 2013 to 2019.

Diesel margins specifically are seen at between $19 and $26 per barrel higher than they were before March, Reuters reported.

The regional disparity is striking. As of May 2026, U.S. diesel margins stand at $49.12 per barrel, Europe at $33.90 per barrel, Asia at $18.25 per barrel, and the Middle East at $22.40 per barrel. American refiners are buying cheaper WTI crude while selling into global product markets priced off the higher Brent benchmark—a spread that has widened dramatically since February 28.

U.S. Gulf Coast refiners have the highest margins they've ever had as Middle Eastern oil flow disruptions increase demand for U.S. exports of fuel, according to analysts. But there's a catch: Phillips 66 announced that rising commodity prices led to a loss of $900 million before tax in the first quarter because the company's hedges became less valuable as oil prices surged.

Meanwhile, Greek tanker operator Heidmar reported a more than 200% increase in revenue in the first quarter compared to last year, mainly because of "historically elevated" shipping rates.

Can Non-OPEC Producers Fill the Gap?

One country is trying. Guyana hit 926,550 barrels per day by late February 2026, with four more projects under development expected to push output to 1.7 million barrels per day by 2030.

ExxonMobil set a new quarterly production record in Guyana of more than 900,000 gross barrels of oil per day in the first quarter, according to the company's SEC filing.

Iran's closure of the Strait of Hormuz has sharpened the strategic importance of Guyana's growing exports—about a third of which already flow to the U.S. The tiny South American nation has gone from zero production in 2018 to the continent's second-largest oil producer behind Brazil in less than eight years. An ExxonMobil-led consortium has made over 30 major discoveries in the offshore Stabroek Block, estimated to hold at least 11 billion barrels of crude oil.

But Guyana's surge—impressive as it is—can't offset what's been lost. The country's entire output barely covers 10% of the 9.1 million barrels per day shut in across the Persian Gulf.

Will LNG Markets Crack Next?

They might already be cracking. Workers at Inpex's Ichthys liquefied natural gas export project in Australia started strikes Monday after talks stalled, with workers downing tools for four hours a day. Ichthys accounts for about 2% of global output and has the capacity to export around 9.3 million tons a year, mainly to Japan, The Japan Times reported.

The strike stands to have an "outsized impact" on the market—LNG supply is down about a fifth after Qatar halted production, while the Strait of Hormuz remains largely closed, according to the Offshore Alliance union. The union has served another notice on Inpex setting out industrial action from June 11 to June 23.

The timing couldn't be worse. The reduction in flows of liquefied natural gas exports through the Strait of Hormuz have reduced global LNG supply and sharply increased the spread between the U.S. benchmark Henry Hub spot price and European and Asian import prices, with U.S. LNG export facilities running at near-peak capacity, exporting almost 18 billion cubic feet per day of natural gas in March. Henry Hub natural gas traded at $3.25 per MMBtu Monday, down 2.4%, according to market data.

What Changed This Week

Oil futures shot up Monday following a weekend of renewed fighting in the region and reports Iran had broken off peace negotiations, after falling last week on hopes of an agreement to reopen the strait. The most powerful shipping executives in the world gathered in Athens this week for the annual International Shipping Exhibition, with the Strait of Hormuz the hot topic. Yet most shipping executives remain unwilling to send their cargo ships through the 21-mile channel until the United States and Iran strike a definitive peace agreement.

Chevron CEO Mike Wirth said it will take time to restore confidence shaken by the war, noting that "you need new ships to come back in, and ship owners have to be comfortable sending crews back after being trapped for months. Clearing out inventories to allow fields to restart and repair damage won't happen overnight."

What to Watch

The next two weeks are critical. If the Ichthys LNG strikes escalate as planned on June 11, Pacific Basin LNG markets will tighten further just as Asian buyers compete for Atlantic cargoes. Watch for Japan and South Korea to announce strategic reserve releases—both countries have already signaled vulnerability to the supply crunch.

On the oil side, monitor U.S. gasoline inventories in the weekly EIA report. The EIA forecast U.S. retail gasoline prices to average $3.70 per gallon in 2026, with diesel prices averaging $4.80 per gallon this year and peaking at more than $5.80 per gallon in April. If inventories fall below the five-year average for this time of year, summer driving season could bring $6-per-gallon gasoline to parts of the country—a threshold not seen since the 1970s.

And keep an eye on any movement in U.S.-Iran negotiations. "Our general sense is that the threat to ships crossing the Strait is still significant, and we will not see a full resumption of traffic through the strait until there is a stronger guarantee of safe passage," an oil industry source told CNN Monday. Until that guarantee materializes, the world keeps burning through its buffer—4.8 million barrels at a time.