The Strait of Hormuz is closed, so Asia is running out of fuel. The prices of crude oil, gasoline, diesel, fertilizer, plastic and semiconductors have doubled. However, exports rose in April in Singapore, Thailand, Vietnam and Malaysia. The success is surprising given the tough year for Asia's economy.
The war with Iran is back on and there is no turning back now. The world is running an oil deficit. Global oil inventories will fall to 2.3 billion barrels by December. The OECD stockpile has not been this low since the EIA began keeping records in 2003. Even if the Strait of Hormuz was fully open tomorrow, there would be disruptions for at least 3 to 6 months.
The Atlantic Council’s tenth Global Energy Forum is taking place today. The future of energy systems will look very different from the past, as countries accelerate plans to diversify energy supplies and build more resilient and secure systems. There will be more production in the Western Hemisphere, more strategic reserves, and more bypass routes.
Japan relied on the Middle East for over 90 percent of its oil imports but has diversified its supply chain. The United States expanded its exports tenfold and Japan also managed to approach other oil producers. Oil imports have been secured from Latin America, the Asia-Pacific region, Central Asia and Africa, as well as Canada.
20 percent of global oil and a similar share of liquefied natural gas trade pass through the Strait of Hormuz. The vast majority of those flows are destined for Asia. The crisis poses a stress test for emerging economies in the region. For Asian energy importers, the crisis is already forcing difficult trade-offs between affordability and macroeconomic stability.
Car petrol sales in the Eurozone fell by 3.5% by volume year-on-year in April, the steepest drop since October 2023. Six European economies recorded double-digit declines in fuel sales, among them Germany, Norway, and Austria. 12 EU countries saw diesel prices rise by more than a third in April against a year earlier, with an average increase of 33.7%. The Iran war led to the de facto closure of the Strait of Hormuz and damage to key oil facilities in the Gulf. The UK has also suffered from the war impact, with petrol peaking at £1.59 per litre.
OPEC crude output fell last month, hitting its lowest level in decades. The data excludes the United Arab Emirates, which left the Organization of the Petroleum Exporting Countries last month after six decades. War between a US-Israeli alliance and Iran has taken a heavy toll on oil supplies from the Middle East, largely shuttering the Strait of Hormuz waterway.
U.S. Energy Information Administration has lowered its outlook for global oil demand in 2026. The agency cited high fuel prices, reduced fuel availability, and government conservation measures as key factors behind the drop. The forecast comes as shipping and energy markets continue to grapple with the fallout from the ongoing conflict involving Iran and the effective closure of the Strait of Hormuz. Middle Eastern producers have reduced oil output by more than 11 million bpd. Brent crude prices averaged lower in May amid reports of a potential U.S.-Iran agreement and signs of slowing demand.