The world has burned through oil inventories faster than at any point in recorded history as the Iran war chokes flows through the Strait of Hormuz. With strategic reserves depleting, physical markets seizing up, and a diplomatic resolution still uncertain, the IEA’s latest report paints a picture of a global energy system under historic stress.
The largest oil supply disruption in history
The International Energy Agency confirmed in its latest monthly report that the world is currently experiencing the largest disruption to oil supplies in recorded history. The trigger is the closure of the Strait of Hormuz — through which approximately 20 percent of global seaborne crude oil and liquefied natural gas exports normally transit — following the outbreak of the U.S.-Israel war against Iran on February 28. Tanker flows through the strait have collapsed from roughly 20 million barrels per day in February to just 3.8 million in early April, a reduction of more than 80 percent in a matter of weeks.
The scale of the disruption has no historical precedent. The 1973 Arab oil embargo, the 1979 Iranian Revolution, and the 1990 Gulf War each caused significant supply shocks — but none involved a near-total blockage of the world’s most critical maritime energy corridor for a sustained period. Bloomberg reported on Friday that inventories are being drawn down at a record rate, with the buffer that normally cushions the global economy against supply shocks being consumed faster than it can be replenished.
3.8M – barrels/day through Hormuz in April (down from 20M in Feb)
85M – barrels drawn from global inventories in March alone
$130 – North Sea Dated crude peak (per barrel)
Physical markets seizing up — $20 to $30 premiums on prompt deliveries
The most alarming signal in the IEA report is not in the futures market but in the physical market for immediate crude delivery. While Brent crude and WTI futures were trading around $96 to $98 per barrel at the time of writing, prompt cargoes — oil available for immediate shipment — were trading $20 to $30 above those benchmarks. The divergence between futures and physical prices reflects a market in acute distress: traders are willing to pay a dramatic premium for any oil they can actually receive today, regardless of what the forward curve implies about future supply.
In Singapore, middle distillate prices — which cover diesel and jet fuel — reached all-time highs above $290 per barrel, reflecting the desperation of Asian refiners to secure any available product. Global crude runs are expected to decline by one million barrels per day on average across all of 2026 — a figure that translates directly into reduced manufacturing output, higher transport costs, and upward pressure on prices for virtually every category of goods that depends on petrochemical inputs, which is to say nearly everything.
Strategic reserves being consumed — an uneven global picture
Governments around the world have responded by releasing strategic petroleum reserves at an accelerating pace. The International Energy Agency coordinated the release of 400 million barrels from member-country reserves in March — the largest coordinated SPR release in the agency’s history, exceeding the interventions following Hurricane Katrina and Russia’s invasion of Ukraine. Japan, which sources 94.2 percent of its crude imports from the Middle East, began releasing 80 million barrels in mid-March, equivalent to 15 days of domestic demand. New Zealand released six days of national reserves in coordination with the IEA directive.
But the IEA report highlights a troubling geographic disconnect in how those drawdowns are landing. While stocks in oil-importing Asian nations fell by 31 million barrels in March, inventories within the Middle East and China actually rose — effectively trapped behind the blockade or held in floating storage offshore. The reserves that are declining are precisely those in the countries that most need the oil; the reserves that are rising are in locations where the crude cannot currently reach global markets.
A cascade of consequences across continents
The human geography of the fuel crisis has spread well beyond the countries directly involved in the conflict. The Philippines declared a state of emergency in late March due to fuel shortages compounded by a transport workers’ strike. Myanmar restricted private vehicle use to alternating days, with long queues reported at petrol stations nationwide. Nepal’s state oil corporation announced it would refill only half of consumers’ empty cylinders in order to extend liquid petroleum stockpiles. Pakistan, Bangladesh, Nigeria, Vietnam, and Zimbabwe are among the countries facing severe fuel shortages, while Australia and India — which hold larger reserves — have nonetheless been grappling with widespread panic buying.
The food system is increasingly exposed as well. Iran’s March 18 strike on the Ras Laffan Industrial City LNG complex in Qatar — the largest gas facility in the country — caused a 17 percent reduction in Qatar’s LNG production capacity, with repair timelines estimated at three to five years. The disruption sent Asian LNG spot prices up more than 140 percent in a matter of days. The British think tank The Food Policy Institute warned of long-term increases in food prices due to fuel and fertilizer market disruptions — fertilizer being particularly exposed because approximately 30 percent of global fertilizer shipments normally transit the Strait of Hormuz.
The macroeconomic parallels — and the risks ahead
The IEA explicitly drew comparisons between the current fuel crisis and the 1970s energy crisis, citing acute supply shortages, currency volatility, inflation, and heightened risks of stagflation and recession. Former Federal Reserve Chair Janet Yellen had warned in early March that, depending on the war’s duration, economic growth would suffer and the Fed’s task of containing inflation would become significantly more difficult. The consumer price index had been running at 2.4 percent in January; by April, energy-driven inflation was reversing months of progress on price stabilization across major economies.
JPMorgan Chase strategists have identified Indonesia, India, and several Southeast Asian economies as the most exposed to a prolonged disruption, given their dependence on Middle Eastern crude and their limited ability to rapidly pivot to alternative suppliers. China, which holds larger domestic reserves and has been more aggressively securing alternative supply routes, is better positioned in the short term — though Chinese oil inventories held near the strait remain effectively inaccessible so long as the blockade continues.
How long can reserves last?
The central question facing energy policymakers is whether strategic reserves can bridge the gap until a diplomatic resolution reopens the strait — or whether the world will exhaust its buffers before a deal is reached. At the March drawdown rate of 85 million barrels per month, and with the IEA’s coordinated release now mostly deployed, the margin for error is narrowing rapidly. TD Securities analysts estimated in late April that nearly one billion barrels of combined crude and refined product supply will have been lost by the end of May if the blockade holds — a figure that would represent the single largest supply disruption event since commercial oil markets were established in the late 19th century.
As of Friday, May 9, the Strait of Hormuz remains functionally closed to normal commercial traffic. The U.S. naval escort mission — Project Freedom — has succeeded in moving a small number of vessels through a security corridor, but at a rate far below what is needed to meaningfully reduce the backlog of more than 400 ships stranded in the Persian Gulf. Trump’s ultimatum to Iran — accept a 14-point deal or face renewed bombing — has yet to receive a formal response from Tehran. Until the diplomatic impasse resolves, the drain on global reserves will continue.
