Societe Generale strategists Michael Haigh, Ben Hoff, and Jeremy Sellem report a dramatic collapse in oil flows through the Strait of Hormuz, with estimated flows now at approximately 0.5 million barrels per day (mb/d), representing a decrease of 19.5 mb/d compared to average levels [1]. After accounting for limited pipeline rerouting, around 17 mb/d of oil remains stranded, exacerbating the supply shock [1]. The disruption has led to nearly 2 mb/d of Gulf refining capacity being taken offline, due both to logistical constraints and attacks on infrastructure, which are tightening global product balances and causing prices to spike [1].
Europe is currently somewhat insulated from the immediate impact due to ongoing draws on its product inventories, holding nearly 70 million barrels of jet fuel in commercial and strategic tanks. This stockpile is sufficient to offset up to a 300 kb/d shortfall in Gulf-sourced supply for several months, but mounting pressure is evident across middle distillates, particularly diesel and jet fuel, given the Gulf's critical role as a supplier to Europe, Africa, and Asia [1].
Tightness is also emerging in naphtha, essential for Northeast Asia's petrochemical sector, and reduced LPG shipments from the UAE and Qatar are already lifting propane markets. The global system is being forced to rebalance through higher product prices and policy responses worldwide [1]. Shut-ins are accelerating rapidly, already nearing 7 mb/d and potentially reaching double-digit levels within days, further intensifying the supply shock [1].
CONCLUSION
The collapse in oil flows through the Strait of Hormuz has triggered a severe global supply shock, leading to spiking prices and tightening product balances. While Europe is temporarily buffered by its inventories, mounting pressure across key products and accelerating shut-ins signal significant market disruption. The situation is forcing a global rebalancing through higher prices and policy responses.