Crude oil prices settled into a relatively stable range of $90–100 per barrel despite the effective closure of the Strait of Hormuz, according to an IMF Blog published on July 16, 2026. The global system absorbed the largest disruption in decades because supply ran about 2 million barrels a day above demand just before the conflict began. During the March to May period, three main factors closed the remaining gap.
Supply Shock and Price Response
The closure in the Strait of Hormuz cut off approximately 20 million barrels per day of crude oil and refined products, representing one-fifth of global consumption. While producers like Saudi Arabia and the United Arab Emirates redirected what they could through alternative pipelines and ports, these workarounds offset only a fraction of the lost volumes. By the end of May, more than 1.1 billion barrels of crude—equivalent to about 10 days of typical global consumption—had not reached the market. The shortfall at the same stage of the disruption exceeded those of the 1973 oil shock, the Iran-Iraq war, and the Gulf War, the blog noted.
| Historical Shortfall Comparison | Peak Disruption (mb/d) | Duration |
|---|---|---|
| 1973 Oil Shock | ~4-5 | Months |
| Iran-Iraq War | ~5-6 | Years |
| Gulf War | ~6-8 | Months |
| 2026 Strait of Hormuz closure (IMF estimate) | ~20 | Ongoing (March-May) |
Demand Compression and Non-Gulf Production
Demand compression did the heavy lifting, particularly in Asia, as higher prices pushed economies toward coal and renewables. Additionally, oil production outside the Gulf rose by nearly 2 million barrels a day above 2025 levels, led by the United States, Venezuela, Guyana, and Russia. These supply-side gains helped offset a portion of the lost Gulf output.
Inventory Drawdowns and Shrinking Buffers
The remaining deficit—estimated at about 4.0 million barrels a day during March to May—was covered by drawing down global stocks, including commercial inventories in China and strategic reserves. However, this depletion has substantially reduced the market's cushion. The IMF blog warned: "What cushioned the initial blow this time is that energy markets had room to maneuver and absorb it. As tensions flare again in the Strait of Hormuz, that room is now smaller and shrinking further as spare capacity has been deployed, demand has compressed, and inventories have been drawn down. Unless inventories are replenished, the world will start from a weaker position when the next shock comes."
"By the end of May, more than 1.1 billion barrels of crude--equivalent to about 10 days of typical global consumption--had not reached the market. At the same stage of the disruption, the shortfall exceeded those of the 1973 oil shock, the Iran-Iraq war, and the Gulf War." — IMF Blog
Path to Recovery and Policy Lessons
A recent US-Iran framework agreement to reopen the strait sent prices lower, as stranded oil on tankers could rapidly return to the market. Despite this development, significant uncertainty remains regarding when freedom of navigation will be fully restored and how quickly the shipping and insurance industries will respond. IMF estimates indicated that it will take two to three months for a significant share of oil flows to resume after a full reopening, raising concerns that prolonged halts could cause permanent output losses.
For global policymakers, the IMF highlighted three critical lessons from the disruption:
- Rebuilding inventories remains essential to prepare for future supply shocks.
- Relying on a single chokepoint leaves the global economy heavily exposed, making the diversification of both energy routes and sources vital.
- Government support to consumers must remain targeted to the most vulnerable and temporary to protect budgets while preserving the price signals that encourage energy efficiency.
The blog concluded that "whenever supply begins to recover, the oil deficit will close only gradually, drawing inventories closer to operational minimums—the level below which the physical system itself begins to bind." With buffers stretched thin, any new disruption could have a more severe impact on prices and availability.
Sources:
