Hormuz Disruption Enters Prolonged Phase as Oil Industry Braces for Crisis

Asia's crude oil industry is bracing for an extended disruption to supplies from the Middle East due to the ongoing conflict in the Strait of Hormuz. The industry has a good idea of how to safely and sustainably reopen the waterway, but they know that getting U.S. President Donald Trump to back down and leave the region is unlikely.

The conflict started on February 28 when the U.S. and Israel attacked Iran, causing volumes through the Strait of Hormuz to slip to near zero in the weeks following. While some volumes have recovered, they are still well short of pre-war levels, with only around 75% of global crude and refined fuels moving through the waterway.

The real crisis is in the supply of refined products, with Asia's imports of light and middle distillates nearly 30%, or about 2 million bpd, below pre-conflict levels. The oil industry initially thought the conflict would be resolved within a matter of weeks or months, but that optimism has evaporated.

APPEC delegates now talk of how to navigate a prolonged disruption, with some suggesting that the conflict will only be resolved with regime change in Washington or Tehran. One delegate stated, 'We need a political settlement, but that will take regime change in Washington or Tehran.'