War-Driven Oil Shortage Exposes Fragility of Global Energy Buffer
The world's oil companies were expected to produce more oil than people wanted to buy by 2028, according to the International Energy Agency's prediction in 2023. This led to low oil prices, which discouraged investment in new wells and refineries.
However, no one anticipated a war breaking out in the Middle East, specifically Iran, that would block the main route for Middle Eastern oil to reach global markets via the Strait of Hormuz in March 2026. The conflict caused a massive shortage of oil, leading to fuel shortages and price increases across various industries, including gasoline, diesel, fertilizer, food, and consumer goods.
The mismatch between demand and supply was not due to a lack of forecasting, but rather the fragility of the global buffer for disruption. Even with strategic reserves, the coordinated release from these supplies did not have a lasting impact on the shortage.