Hormuz Standoff Drains Oil Cushion as Demand Falls

The global economy has survived the initial shock of the US-Iran war, but the buffer that protected consumers from further pain is rapidly depleting. Global oil stockpiles are dwindling as commercial traffic through the Strait of Hormuz remains severely disrupted.

According to the International Energy Agency (IEA), elevated fuel prices and the ongoing closure of the strait are already affecting consumption, with global oil demand forecast to fall by 1.6 million barrels a day this year.

The IEA warns that higher crude prices have a ripple effect on industries such as transport, industry, and petrochemicals, making energy more expensive for importing economies and encouraging consumers to reduce fuel use.

However, the danger lies in what happens if the disruption persists beyond the world's ability to draw from inventories and find alternative supplies. The Strait of Hormuz normally carries around 20% of the world's oil, but only 14 vessels crossed it on Tuesday, compared to roughly 120 ships a day before the war.