The Iran war has caused a significant disruption in global oil supplies, with reserves depleting at a record pace. According to analysis by S&P Global, reported by the Financial Times, stockpiles of crude fell by 6 million barrels a day in April, while demand dropped by 5 million barrels a day due to higher prices. This is the sharpest decline since the pandemic. Jim Burkhard, head of crude research at S&P, warned that an 'inevitable market reckoning is coming,' as demand is being outstripped by supply losses. Goldman Sachs also backed these warnings, stating that global stockpiles are approaching their lowest levels in eight years, with only 45 days' supply of refined products like gasoline, diesel, and jet fuel left worldwide.
The blockade of the Strait of Hormuz, a critical shipping route, has prevented oil tankers from delivering supplies to Europe, which relies on the strait for 30 to 40 percent of its jet fuel. This has led to widespread travel disruptions, with airlines canceling flights and holidaymakers facing potential cancellations. Britain, the largest net importer of jet fuel in Europe, is particularly vulnerable, with supplies already 'critically low,' according to Goldman Sachs. However, aviation experts say that increased deliveries of jet fuel from the US may mitigate the risk of rationing.
Shipping companies are also facing uncertainty as they wait for the Strait of Hormuz to reopen. Hundreds of vessels remain stuck in the Persian Gulf, and costs are piling up. President Donald Trump announced 'Project Freedom,' a plan to guide ships out of the strait, but the effort was paused after just one day to allow time for a potential deal to end the war. Meanwhile, the risks for ships and crew have not faded, with attacks on vessels and concerns about Iranian speedboats and drones leading major ship owners to deem the strait too dangerous.
Airlines have already cut two million seats from May's schedules, and the situation could worsen, with one expert warning that up to 85,000 flights could be canceled in June if supplies continue to be squeezed. The conflict appears to have descended into a stalemate, with the US awaiting a response from Iran on several key points in the next 48 hours. President Trump has claimed 'Great Progress has been made toward a Complete and Final Agreement' with Iran.