Hormuz Reopening Threatens to Unravel OPEC's Fragile Grip

The impending reopening of the Strait of Hormuz could be catastrophic for OPEC's already fragile grip on the market, according to Ron Bousso. The closure of the vital waterway has sharply diminished output from the Organization of the Petroleum Exporting Countries and shifted the industry's center of gravity away from the Middle East.

The war in Iran has led to a loss of roughly 13 million barrels per day of Middle East exports, representing more than $80 billion in lost revenue. With pent-up demand from major energy importers, particularly in Asia, producers will seek to maximize oil exports and plug fiscal holes created by the conflict.

However, this could lead to oversupply, with OPEC's share of global production dropping to an all-time low of around 22%. The cartel looks less capable of playing its traditional role in stabilizing markets due to its weakened state and fragmentation.

The reopening of Hormuz will leave Riyadh in a difficult position, as revenue-starved OPEC members compete aggressively for market share. Saudi Arabia's own wartime actions may further undermine its leverage, making it harder to persuade producers to restrain output.