The Strait of Hormuz closure has entered its ninth week, and the oil shock is moving beyond the tanker lanes into the real economy. Traders say a billion barrels of supply loss is already all but guaranteed, while governments that rushed to release emergency inventories after the conflict began at the end of February are seeing the damage spread into prices, forecasts and flights.
The first hit came fast after the U.S. and Israel first attacked Iran on Feb. 28. The most dependent industries and markets were jolted immediately, then demand destruction started in less obvious places, including petrochemicals in Asia. Airlines in Europe and the U.S. are now cutting thousands of flights, and global oil demand is on track to slump the most in five years this month, according to the International Energy Agency.
Saad Rahim, speaking this week at the FT Commodities Global Summit in Lausanne, said demand destruction was happening in places that are not visible pricing centers. His warning matches the pattern in the market: Brent crude closed at about $105 a barrel on Friday even after the supply loss widened, suggesting emergency stocks have cushioned prices only temporarily.
The scale of the strain is becoming harder to ignore. Gunvor Group estimates the loss could double next month to 5 million barrels a day, equal to 5% of world supplies. Other analysts and traders say the impact has already reached around 4 million a day. Worldwide demand already faces a hit of 5.3 million barrels a day this quarter, and the longer the vital oil channel stays shut, traders say, the more consumption will have to recalibrate lower to match supply that has dropped at least 10%.
The closure is now feeding into broader economic forecasts. Germany has slashed its growth outlook in half, the International Monetary Fund has trimmed global estimates because of the war, and in one severe scenario modeled by the European Central Bank, Brent peaks at $145 a barrel and cuts the region's growth in half. That is the next stage of a strait of hormuz oil shock that has already moved from petrochemicals and LPG into gasoline, diesel and macroeconomic planning.
Rahim's point is the one traders keep coming back to: the adjustment is already happening, but if this continues, it has to get larger and larger. With demand weakening as fast as supply has been cut, the question is no longer whether markets can absorb the shock. It is how much more consumption has to break before the Strait of Hormuz reopens.