Fuel shortage, will it trigger an outbreak?

The conflict between the U.S., Israel, and Iran has entered its fourth week. The Strait of Hormuz remains largely closed, and potential oil supply shocks are still brewing. Meanwhile, Friday marks the deadline for the five-day ultimatum issued by U.S. President Trump, with troops expected to gather in the Persian Gulf. Whether conflict will erupt or negotiations will begin, global markets will face a new wave of uncertainty in oil prices.

Iran Adjusts Flow Through the Strait of Hormuz

Iran is implementing a “precise control strategy” over the critical Strait of Hormuz, allowing only specific ships to pass through this vital route.

However, analysts believe the global oil market may be underestimating the risk of further supply shortages that this new strategy could trigger. Matt Smith, chief analyst at Kpler, said about one-third of the world’s seaborne crude depends on this route, with only a few other ships permitted passage by Iran.

Kpler’s shipping data platform MarineTraffic reported that Iran aims to send a “strategic signal” rather than fully cut off global oil supplies through the strait. Data released earlier Tuesday showed only nine ships have passed through since Monday. Several news outlets report that Iran has begun charging tolls of up to $2 million per passage.

Additionally, HormuzTracker data shows about 2,500 ships are still stranded inside the Persian Gulf, with another 400 waiting outside the strait. Smith said that as Iran’s related conflicts continue to escalate, the most surprising thing is that the Strait of Hormuz remains essentially blocked. Meanwhile, the world still seems to be underestimating the imminent supply shortages and rising fuel prices.

Iran’s response to the U.S. ceasefire “olive branch” has been tepid. According to Xinhua News Agency, Iran’s state television quoted a senior Iranian official on the 25th, saying Iran rejects the ceasefire proposal from the U.S. and has put forward five conditions for ending the war.

The official stated that Iran will not agree to a timetable set by President Trump for ending the conflict. “Iran will only end the war when it decides to do so and when its conditions are met.”

The official outlined five conditions for ending the war: the enemy must fully cease “aggression and assassination”; a practical mechanism must be established to ensure the war is not imposed on Iran again; war reparations and compensation for damages must be guaranteed and clarified; all fronts and resistance groups in the region must cease hostilities; and Iran’s sovereignty over the Strait of Hormuz is a natural and legitimate right that must be recognized.

The U.S. has also taken action. According to previous reports by CCTV News, the White House is considering plans to occupy or blockade Harker Island to pressure Iran into reopening the Strait of Hormuz.

OPIS chief oil analyst Danton Sinquegna said that the oil market currently “seems to be pricing in the dawn at the end of the tunnel.” However, he does not believe the market has “escaped danger.” Sinquegna’s focus remains on the five-day energy facility strike pause announced earlier this week by President Trump. “Are these five days just to buy time for troop movements? I think this weekend is critical,” he said.

Will Oil Shortages Arrive?

JPMorgan Chase recently predicted in a report that, due to the near halt of passage through the strait, nearly 16 million barrels of oil per day are “effectively unable to flow” in the global market.

Market observers say there are no signs of a quick restart of shipping through the strait in the short term. If shipping cannot be rapidly resumed, supply gaps will continue to widen. The International Energy Agency’s latest monthly market report states: “The current scale of disrupted fuel supplies exceeds the supply losses during the 1973 oil crisis.”

Asian countries are especially concerned: the Philippines has declared a state of energy emergency, and South Korea says it is preparing for the “worst-case scenario.”

Shell CEO Wael Sawan said at the Cambridge Energy Week conference in Houston, Texas, on Wednesday: “South Asia is the first to be affected, followed by Southeast Asia and Northeast Asia, and as April approaches, Europe’s impact will become more pronounced.” Sawan warned governments not to take measures that could amplify supply disruptions, adding that without energy security, there is no national security.

Total CEO Patrick Pouyanne also said at the same event that the refined oil market is “out of balance.” He expressed concern about Europe’s plans to stockpile natural gas in summer, warning that this will compete with strong demand in Asia. EnQuest, a producer focused on North Sea oil and gas extraction, also warned that this crisis will have “significant” medium- to long-term impacts. Capacity losses are causing 2 to 3 million barrels of oil to exit the market daily, and industry surplus capacity “will not be available for years to come.”

Stephen Innes, managing partner at SPI Asset Management, commented that the Iran-related conflict and the situation in the Strait of Hormuz “have no ready historical template.” “Such a scale of shipping disruption on a strategic waterway involving multiple countries, with unclear military situations and global energy infrastructure at risk, has no exact precedent.”

Innes said the market can estimate how much oil could be rerouted, what parts are replaceable or irreplaceable, and the limits of strategic petroleum reserve releases, spare capacity, freight restrictions, and refinery alternatives. “The biggest variable is not the oil supply itself, but time. Currently, the duration of this oil shock remains unpredictable. Policymakers may be able to mitigate the impact but cannot eliminate physical transportation bottlenecks, which will determine price trends,” he added.

The Oxford Economics Research Institute released a report stating that their latest baseline scenario assumes that the Strait of Hormuz will remain impassable until May, with ongoing geopolitical tensions continuing to disrupt trade into the second and third quarters. “The U.S. has temporarily delayed military strikes to reach an agreement, which may tilt risks downward, but it does not fundamentally change this scenario. This may be a preliminary step toward de-escalation, but significant uncertainty remains. It is premature to assume the strait will reopen earlier than in the baseline scenario.”

The report projects Brent crude oil prices averaging $114 per barrel in the second quarter. “We assume that the strait’s traffic will recover to about half of pre-conflict levels by May, and trade disruptions will gradually ease over the remaining period to 2026. Natural gas prices are also upwardly revised, with European benchmark TTF prices expected to be 61% higher in the second quarter than pre-conflict levels. Considering European buyers’ need to stockpile for winter, we expect price shocks to persist into the second and third quarters. Similar adjustments are made for Asian benchmark prices, but the U.S. is relatively insulated from the impacts on the global liquefied natural gas market.”