The global oil market is on course to lose at least 1 billion barrels of crude oil and refined products due to the ongoing conflict in the Middle East and restricted shipping through the Strait of Hormuz, according to leading industry executives.
The warning comes from Russell Hardy, chief executive of Vitol, the world’s largest independent oil trading company, who said the disruption has already removed around 12 million barrels per day from global supply since late February, when the United States and Israel became involved in military operations linked to Iran.
Speaking at an industry summit in Switzerland, Hardy said the scale of the disruption is already historically significant.
“In round numbers, the 1 billion barrels figure is now a given,” he said. “We have probably already lost 600 to 700 million barrels at this stage, and it will take time for production and infrastructure to recover, if and when that happens.”
Largest supply shock in decades
Hardy described the situation as the most severe disruption to global energy markets in nearly 40 years in the industry, surpassing even the 1990 oil shock following Iraq’s invasion of Kuwait.
While previous crises also involved refinery outages and crude supply disruptions, he said today’s situation is more severe because global spare production capacity is concentrated behind the Strait of Hormuz, making the impact immediate and far-reaching.
Wider consequences beyond oil
Traders warn that the effects extend well beyond crude oil supply. Disruptions to gas flows are raising concerns over fertilizer production, which could affect global food markets, while shortages of industrial inputs such as sulfuric acid are already slowing copper mining activity.
The 1 billion barrel loss is equivalent to roughly 10 days of global oil consumption and significantly exceeds volumes released from strategic reserves during previous supply crises.
Risk of economic slowdown
Gary Pedersen, chief executive of Gunvor, warned that prolonged disruption could have severe macroeconomic consequences.
“If the Strait of Hormuz remains closed for months, this becomes a macroeconomic issue that could push the world toward recession,” he said.
Saad Rahim, chief economist at Trafigura, said the market is at a “critical inflection point,” adding that a resolution could prevent a broader global economic downturn.
Uncertainty over recovery
Despite hopes for de-escalation, market participants remain cautious about a swift resolution or the rapid reopening of the shipping route.
Analysts at RBC Capital Markets noted that investors may be underestimating the complexity of the geopolitical situation, while energy consultancy Energy Aspects warned that even partial reopening would still leave hundreds of millions of barrels of refined fuel supply lost in the coming years due to limited global refining capacity.
Amrita Sen of Energy Aspects said that even in a scenario where half of normal flows resume by late May, the market would still face a deficit of around 450 million barrels of refined products such as diesel and gasoline.
She added that replacing such volumes would be extremely difficult before the end of the decade without significant new refining capacity coming online.
As uncertainty persists, industry leaders say the Strait of Hormuz disruption has become one of the most significant stress tests for global energy security in recent history.
