The 2026 Middle East conflict and the disruption of traffic through the Strait of Hormuz generated the largest physical supply disruption in the history of global energy markets. This column examines why energy prices rose by less than the loss of physical supply alone would have suggested. High inventories, emergency stock releases, rerouting, and demand compression have bought time. The key policy question is how long these buffers can continue to absorb the shock.
The disruption of traffic through the Strait of Hormuz has turned the conflict in the Middle East into a global energy shock. Around 20 million barrels per day of crude oil and oil products, together with around 110 billion cubic metres of liquefied natural gas (LNG) per year normally transit through the Strait, roughly one quarter of global seaborne oil trade and close to one fifth of global LNG trade. The shock has renewed concerns about the exposure of energy-importing economies to geopolitical disruptions, particularly in Europe, only a few years after the energy crisis triggered by Russia’s invasion of Ukraine (Emiliozzi et al. 2024).
The conflict immediately affected the prices of major energy commodities and spilled over beyond energy, as the Gulf is also an important supplier of strategic inputs such as fertilisers and aluminium (Figure 1).
Figure 1 Price variations in selected commodities
Despite the unprecedented size of the physical supply loss, prices rose by less than the disruption alone would have implied. High pre-war inventories, emergency stock releases, rerouting, and demand compression all helped cushion the shock.
In recent work (D’Orazio et al. 2026), we analyse the energy-market consequences of the Hormuz disruption and the mechanisms through which global markets absorbed part of the shock.
Before the closure of Hormuz, the global oil market was relatively well supplied. By the end of 2025, the International Energy Agency (IEA) and the US Energy Information Administration estimated that supply exceeded demand by around 3–4 million barrels per day. OPEC+ had begun to unwind voluntary production cuts, US output remained high, and global demand growth was slowing, partly because of the structural deceleration of Chinese oil consumption (Bencivelli et al. 2025). Crude prices reflected these favourable conditions, averaging around $68 per bbl in 2025.
The closure of the Strait disrupted the Gulf’s main export artery, which normally carries about 15 million barrels per day of crude oil and condensates and 5 million barrels per day of refined products; it also affected the region where most spare capacity was located. Oil prices rose sharply, especially for prompt delivery, reflecting concerns over the scarcity of immediately available barrels. Refinery crack spreads widened even more markedly as product markets tightened (Figure 2).
Figure 2 Oil prices and crack spreads
With spare capacity largely unavailable, the market adjusted through several channels. Oil already in transit provided an initial buffer, followed by the record emergency release of almost 400 million barrels by IEA members. Saudi Arabia and the United Arab Emirates rerouted part of their exports through alternative pipelines. Demand compression – especially in China, supported by large inventories – and additional supply from the Atlantic Basin, mainly the US, absorbed part of the shortfall. Overall, the disruption of roughly 20 million barrels per day of Hormuz oil flows left an estimated net shortfall of around 12 million barrels per day after partial offsets by the pre-war surplus, lower demand, alternative supply, and emergency stock releases (Figure 3).
Figure 3 Global oil market adjustment after Hormuz disruption
The gas shock was smaller in volume terms than the oil shock but more constrained logistically. In 2025, approximately 112 billion cubic metres of Qatari LNG and 6.9 billion cubic metres from the United Arab Emirates passed through Hormuz. Together, these flows accounted for close to one fifth of global LNG exports and were shipped mainly to Asia. Unlike oil, these volumes have virtually no alternative export routes.
The shock combined two disruptions: the closure of Hormuz constrained LNG shipping, while Qatar’s precautionary shutdown of gas production and liquefaction facilities reduced the volumes available for loading. Global LNG exports fell from about 48 billion cubic metres in February to 41–43 billion cubic metres per month between April and June. Higher output from North America and other suppliers provided only a partial offset.
The price response reflected these different regional exposures. One week after the outbreak of the conflict, Asian JKM prices were about 80% above their pre-war level, European natural gas prices (TTF) around 70% higher, and US Henry Hub only about 13% higher. Asian buyers were directly exposed to the interruption of Qatari deliveries and bid aggressively for replacement cargoes. Europe was affected mainly through the higher marginal cost of securing LNG as relatively low inventories at the end of the heating season shifted part of the pressure to the summer injection period and potentially to the winter ahead (Figure 4).
Figure 4 EU gas storage levels in the 2022 and 2026 energy shocks
The Hormuz crisis came less than five years after the energy crisis triggered by Russia’s invasion of Ukraine. Three differences are particularly important and help explain the different price response observed so far (Figure 5).
Figure 5 Oil and gas price dynamics in the 2022 and 2026 energy shocks
First, the nature of the shock is different. In 2022, the oil shock was largely sanctions-driven: Russian barrels continued to reach global markets but were redirected towards alternative buyers (e.g. China and India), while Europe progressively lost access to Russian pipeline gas. The Hormuz shock is instead a physical disruption affecting several oil and gas producers simultaneously. The oil volumes involved are much larger: for gas, the roughly 110 billion cubic metres of Gulf LNG affected are comparable to the Russian volumes lost by Europe in 2021–22. The timing also differs: Russian gas flows declined gradually but ultimately proved persistent, whereas the Hormuz disruption was immediate but is, in principle, more reversible.
Second, the geography has shifted. Europe was at the epicentre of the 2022 crisis, whereas Asia bears most of the direct supply loss from Hormuz. Yet the shock remains global: integrated oil markets transmit higher prices across regions, while competition for flexible LNG cargoes spreads scarcity from Asia to Europe.
Third, initial conditions are more favourable today. The 2022 crisis hit already tight energy markets during the strong post-pandemic recovery and, for gas, coincided with disruptions to other sources of European electricity generation. In 2026, oil inventories were relatively high and supply was expected to exceed demand, while new LNG capacity – especially in the US – was expanding global supply. The broader macroeconomic environment was also less prone to amplify the shock. Demand was weaker, labour markets were less tight, and inflation closer to target than in early 2022 (Arce et al. 2026). Europe is also better equipped than in 2022. The infrastructure needed to attract alternative LNG supplies is now largely in place, while more renewables and lower reliance on gas in power generation have increased resilience. However, relatively low storage levels leave Europe exposed to a prolonged tightening of the global LNG market.
The 2026 Hormuz crisis turned a regional military conflict into the largest physical supply disruption in the history of global energy markets. The key uncertainty is its duration. The Hormuz disruption is potentially reversible, but renewed hostilities and mounting US military and economic pressure on Iran underscore the fragility of any return to normality. Four observations and policy implications emerge from the crisis so far.
First, the episode confirms the growing weaponisation of commodities as instruments of international coercion. Spillovers to non-energy inputs also show that energy security cannot be considered in isolation from food, industrial, and digital security. This includes sectors such as data centres and artificial intelligence, which depend on reliable energy supplies and resilient infrastructure (Ferriani and Gazzani 2026).
Second, the duration of the shock matters as much as its initial size. The resilience observed in the first months should not be mistaken for immunity. Importers drew down inventories, commodity flows were redirected, and demand was compressed. These margins become less effective if the disruption persists: inventories are depleted, particularly for refined products where stocks are thinner and substitution is more limited, repeated emergency releases become more difficult, and more of the adjustment must come through higher prices and lower consumption.
Third, as in 2022, fiscal support has relied mainly on tax reductions, subsidies, and other support measures. So far, the response has been much smaller than during the 2022–23 crisis, especially in Europe, but broad-based measures weaken incentives to conserve energy precisely when demand adjustment may be needed. With fiscal conditions less favourable than in 2022, support should remain temporary and targeted (Verwey and Orsini 2026).
Finally, the crisis highlights the need for a broader strategy of structural resilience. Emergency inventories and rerouting provide only temporary relief. A more robust strategy requires diversified suppliers and import routes, appropriately calibrated strategic inventories, and greater flexibility and integration of energy infrastructure. Over the longer term, electrification, renewable generation, storage and grid investment can reduce dependence on imported fossil fuels and expand the scope for substitution when suppliers or trade routes are disrupted.
Source : VOXeu
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