The situation in the Strait of Hormuz is no longer just a headline—it has become the defining variable for the global energy market. With eight weeks of conflict behind us, the supply equation has fundamentally changed, and the “floor” for oil prices is rising. Here is the breakdown of what this means for the market:

• The Supply Gap is Widening: With roughly 14 million barrels per day (b/d) of supply currently disrupted, we are looking at a cumulative loss of over 850 million barrels in just the first two months. This isn’t just a temporary hiccup; it’s a massive, structural shortfall that existing inventory cannot cover indefinitely.
• The “Refined” Pain: It’s not just about crude. The market is feeling the squeeze in refined products even more acutely. Gasoil and jet fuel prices are up 102% and 120% respectively, far outstripping the rise in Brent futures.
• Demand Destruction is Real: High prices are doing their job, but at a cost. We are already seeing an estimated demand destruction of 1.6 million b/d as flight cancellations, reduced petrochemical run rates, and energy-saving measures take hold.
• High-Stakes Scenarios: While the base case is difficult, the upside risks are extreme. A prolonged closure or renewed escalation could halt remaining supply, pushing prices to new record highs and likely triggering an even sharper global economic downturn.