On April 24, Foreign Minister Araghchi stated: “Hormuz will remain closed until the $11 trillion in frozen Iranian assets are released.” “Iran is not demanding the lifting of sanctions. Iran is demanding the return of 46 years of stolen money.”
The situation in the Strait remains tense. IEA Executive Director Fatih Birol stated on Thursday that the war in the Middle East and the closure of the Strait of Hormuz represent the greatest threat to energy security the world has ever faced. These statements mark the first time the IEA has described the current conflict in such terms, elevating its assessment above previous oil crises, including the 1973 oil embargo and the 1979 Iranian Revolution.
The Strait of Hormuz normally handles approximately 21 million barrels of crude oil and condensate per day, equivalent to about a fifth of global petroleum product consumption. A closure or prolonged disruption of the Strait would block not only exports from Iran and Iraq, but also most Saudi, Kuwaiti, and Emirati crude destined for Asian refineries, with no alternative export routes of comparable scale or speed available.
Birol’s position indicates that the IEA now considers this scenario to be concretely possible, rather than hypothetical, a shift that justifies coordinated releases of stocks and rationing of demand should the bottleneck remain blocked.
JP Morgan, however, has intervened in oil speculation. In just one month of the Strait of Hormuz closure, the world lost 13.7 million barrels of oil per day, or a fifth of the entire global supply. According to JP Morgan, the oil market has no quick fix for this crisis.
The safety net is gone. Saudi Arabia and the United Arab Emirates used to keep oil reserves in reserve for emergencies. Now that reserve is gone. Without it, the entire system is running dry. With no spare oil to pump, the world is consuming its stored reserves at a staggering rate of 7.1 million barrels per day. This situation cannot continue.
Demand is plummeting. As oil isn’t reaching consumers, demand is collapsing sharply. Asian chemical plants are shutting down because they can’t get the fuels they need. Airlines are reducing flights, especially in the Middle East, driving up costs and hurting profits. Even after reduced demand and emergency releases, JP Morgan says a daily shortage of 2.3 million barrels persists, with no immediate solution.
US shale oil is unable to provide a sufficiently rapid response. US shale oil is the only major flexible source left, but it takes three to six months to significantly increase production, and up to a year for significant increases. This is far too long for the current emergency.
Prices are rising, but not enough. Brent crude futures averaged around $100 in April, but the real price of physical oil has jumped to $122 a barrel. The gap between theoretical prices and the actual price of oil shows that the market is more tense than it appears. The old safety nets are failing. Without them, JP Morgan believes oil prices still need to rise to rebalance the market. Soon, automakers, airlines, and industries will suffer.
The fact is, when Trump talks about Hormuz, the market fluctuates; when Iran talks about Hormuz, the market fluctuates, and inventors get scared.
Antonio Albanese e Graziella Giangiulio
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