Traffic through the Strait of Hormuz has all but stopped, and traders warn the hardest blow to oil demand is still to come. The pause has tightened physical markets and is straining refining, storage and shipping capacity, traders and industry figures said.

Shipping stoppage tightens a global market Traffic through the Strait of Hormuz has all but stopped, and traders warn the pause is moving beyond a temporary shock. A significant share of the world's oil normally passes through the narrow waterway beside Iran, and alternate routes and pipelines can handle only a fraction of that volume, industry figures at recent conferences and in private briefings said. Governments have taken emergency steps to reduce immediate strain. The United States and partners announced a coordinated release from strategic reserves, and Washington has temporarily relaxed some sanctions to give markets breathing room. Even so, traders and oil executives say the relief is time‑limited. Senior executives at events such as S&P Global's CERAWeek warned that paper prices — the headline numbers quoted in the press — have not fully captured strains in physical markets, especially in Asia. Physical shortages are surfacing Supply managers and refiners are already showing stress. Cuts at refineries in the Middle East and Asia have pushed up prices for refined products such as diesel and jet fuel in recent days, and available tanker and storage capacity in the Gulf is being stretched. Once storage tanks fill, producers could have no choice but to curtail output, and the market would shift from rerouting oil to accepting outright production losses. Analysts told delegates the gap between financial, paper markets and the physical trade is growing, with the difference particularly acute in Asia — the region that normally takes the most crude from the Middle East. One analyst at a recent industry event said Brent could reach $100 a barrel in the coming days to weeks if the closure of Hormuz solidifies into a multi‑week event rather than a brief disruption. Traders at major houses, some speaking on condition of anonymity, warned $100 crude could arrive rapidly unless hostilities ease. Policy actions and their limits US officials have argued military action could blunt the ability to disrupt shipping, but most agree the only full remedy is reopening the strait. Measures in place include: - coordinated releases from strategic petroleum reserves; - temporary relaxation of some sanctions to ease flows; - insurance guarantees and naval escorts for commercial shipping; - allied navies taking steps to protect merchant vessels. Executives at industry gatherings stressed these are stopgaps. They said disruptions that began in South Asia had spread to other parts of Asia and could affect Europe more as April progressed, and that relief from strategic reserves and temporary sanctions will run out if the strait stays closed. Some countries have already begun to cut production. Why this matters A significant share of Middle East crude normally passes through Hormuz, and Asia — the region that takes most of that oil — is already seeing a growing gap between paper markets and physical supply. Analysts at industry events warned Brent could reach $100 a barrel in the coming days to weeks if the closure becomes a multi‑week event, a price rise that would affect consumers and industry, including in Europe, as April progresses.

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Analysts said Brent could reach $100 a barrel in the coming days to weeks if the closure of the Strait of Hormuz solidifies into a multi‑week event.

This article was created with AI assistance.