Liberal YouTubers

Robin Brooks and Ben Harris
May 22, 2026

Editor's note: This article was amended on May 25, 2026, to clarify daily production volumes of crude and refined product.

The shortfall in global oil supply due to the closure of the Strait of Hormuz has roiled markets and prompted discussions of a global recession. Yet, despite this massive shock—on the order of 20% of global oil supply—the conflict in Iran has to date failed to boost oil prices to catastrophic levels, with oil benchmarks remaining below their 2022 highs in the wake of Russia’s invasion of Ukraine. (Price movements for natural gas and some refined products have been more severe.) In this post, we focus on crude oil and present a rough framework to explain why global prices have yet to skyrocket, while also advancing a timeline to assess when prices could reach more alarming levels. The bottom line is that the supply shortfall will build in coming months as temporary buffers are depleted. And if markets grow increasingly pessimistic over an eventual resolution to the impasse in the strait, oil prices may rise materially higher.

Structural versus temporary forces in global oil markets

Sharp crude price gains have been constrained by three primary factors. One, structural adjustments in the crude oil trade—including pipeline bypass and the onset of new crude sources—that mitigate the supply shock. Two, the existence of global inventories that are designed to address supply volatility and provide temporary relief in instances such as this. And three, an overarching belief in markets that the impasse in the Strait of Hormuz will be resolved in short order.

From this perspective, the current market for crude is characterized as a race between the levels of temporary buffers and expectations for the duration of the impasse. This framework is supported by observed price action since the start of the conflict. The sharp swings in global oil prices reflect changing views on the likely duration; indications that the strait will remain closed for longer sees oil prices rise, while headlines suggesting a quick resolution prompt oil prices to tumble.

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Prior to this conflict, around 20 million barrels of oil and refined product transited the Strait of Hormuz daily, with volume markedly lower in recent months. Measured against global production of crude and other liquid fuels of around 100 million barrels of oil per day (mb/d), plus similar volumes of refined product, this ranks as the biggest supply disruption ever.

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