The worst crude supply shock in history threatens to scar the global economy for years, with the prolonged closure of the Strait of Hormuz removing over 10 million barrels per day of oil and leaving few alternatives.
The two-month-long blockade of the world’s most critical oil chokepoint has sent Brent crude prices soaring 44 percent above pre-war levels and triggered a global race for supply, raising the risk of a worldwide recession. Even if the strait were to reopen today, experts warn that restarting thousands of shut-in wells across the Middle East would be a complex challenge, taking months or even years and leaving permanent damage on production capacity.
"The longer things are shut in, typically the more complex they are to bring back on," Jeff Miller, CEO at Halliburton, said on the company’s recent earnings call, noting the situation will have "meaningful and long-lasting implications for the global energy sector."
The disruption has already removed hundreds of millions of barrels from the market, with the International Energy Agency estimating it would take around two months to re-establish steady exports after a reopening. With most of the world's spare production capacity held by Saudi Arabia and the UAE, that supply remains trapped behind the blockade. "Today, all of the spare capacity is behind the Strait of Hormuz, so the impact is obviously very direct," Russell Hardy, CEO of oil trader Vitol, said at the FT Commodities Global Summit.
The crisis extends beyond crude, threatening to create new bottlenecks in other industrial supply chains. A recent JPMorgan report warned that about 20 percent of the global supply of petroleum coke, a key material for aluminum smelting, is directly affected by the Hormuz blockade. The bank, which already forecast a 2 million-ton aluminum deficit for 2026, noted that petroleum coke prices have only risen about 21 percent, suggesting the market has not fully priced in the risk of a shortage that could further impact global aluminum production.
Iran's Aging Fields Under Pressure
The American blockade is putting immense pressure on Iran's domestic oil industry. With diminishing storage capacity, estimated by analysis firm Kpler at just two weeks of production, Iran may be forced to halt pumping at some of its aging wells. Experts say restarting production from these fields after a shutdown is not a simple task.
"Those oil wells are not maintained well. Their machinery is not maintained well," said Miad Maleki, a former sanctions expert at the U.S. Treasury and now a senior fellow at the Foundation for Defense of Democracies. "Once shut off, he added, the wells won't easily 'snap back after a few months.'"
This operational strain is forcing production cuts that set up a delayed but significant financial squeeze on Tehran. The IEA noted that while properly shut-in fields could restart quickly, those with low recovery rates could face delays of six months or more. SLB’s CEO Olivier Le Peuch cautioned that areas where disruptions were more abrupt may require a more gradual ramp-up.
A Long and Uncertain Recovery
Analysts are forecasting a prolonged impact on prices, reflecting expectations of a lasting supply shock. While the Brent annual average for 2026 rose 10 percent in April, prices for future years saw much larger gains, with the 2027 average rising 25 percent and 2028 climbing 16 percent, according to analysis from Saxo Bank. This reflects the anticipated long-term damage to Middle East infrastructure and reduced production capacity.
The halt to hostilities between the U.S. and Iran has not yet produced a diplomatic breakthrough to reopen the strait. Washington recently paused "Project Freedom," its military operation to escort ships, to focus on securing a deal. However, with Iran's new supreme leader, Mojtaba Khamenei, vowing not to abandon the country's nuclear ambitions, the standoff continues.
"In round numbers, the 1 billion barrels [of lost supply] is baked in now because we have probably lost 600 million to 700 million at this stage," Vitol's Hardy told the FT summit. "By the time things get moving again, if they get moving again, it takes time to bring all back."
This article is for informational purposes only and does not constitute investment advice.
