The global oil market has absorbed the loss of more than one billion barrels of crude supply since the onset of the conflict involving Iran, but risks remain due to depleted strategic reserves and ongoing uncertainty over long-term peace in the region. The disruption, triggered by Tehran’s blockade of the Strait of Hormuz following U.S. and Israeli military actions beginning February 28, marked the largest supply interruption in history, with a peak daily loss of 14 million barrels.

Despite initial fears of severe shortages in fuel supplies across Asia and Europe, widespread panic over gasoline, diesel, and jet fuel scarcities did not materialize. After reaching a peak near $126 per barrel in April, Brent crude prices have since declined, currently trading below levels seen at the conflict’s start. Analysts attribute this relative stability to confidence in more robust and adaptable energy and economic systems, as noted by John Baffes, senior economist at the World Bank.

Significant structural shifts over recent decades, including a substantial reduction in oil intensity—the measure of oil's role in economic activity—have helped buffer the impact. Since the 1970s, oil intensity has declined by more than half in advanced economies and around 20 percent in emerging markets. Beyond this trend, three primary factors helped mitigate the crisis: Gulf producers such as Saudi Arabia and the United Arab Emirates established alternative export routes; major consumers, led by China, reduced purchases; and global strategic reserves were heavily tapped, including a record release coordinated by the International Energy Agency (IEA).

At the conflict’s outset, China held an estimated 1.4 billion barrels in reserves, surpassing the combined stockpiles of the 32 IEA member countries. China’s accelerated adoption of electric vehicles and flexible adjustments in refining and petrochemical output further eased demand pressures. Ilia Bouchouev of the Oxford Institute for Energy Studies emphasized that global market management has become more sophisticated compared to past OPEC disruptions.

The IEA’s coordinated release of approximately 400 million barrels, along with messaging from the U.S. administration about imminent conflict resolution, helped temper market fears. Analysts from Société Générale observed that these signals discouraged speculative betting on prolonged price hikes. With the recent signing of a preliminary peace agreement, markets have begun normalizing, though experts caution that underlying vulnerabilities persist.

Key oil producers in the Gulf—Saudi Arabia, Kuwait, Qatar, Iraq, and Bahrain—have resumed output, yet some infrastructure damage from Iranian attacks will take years to fully repair. Data on tanker traffic through the Strait of Hormuz paints a more cautious picture, and progress toward a comprehensive peace deal remains slow, with critical issues such as Iran’s nuclear program unresolved. The current 60-day ceasefire between Washington and Tehran further underscores the fragility of the situation.

Meanwhile, the global economy faces the challenge of rebuilding oil inventories drawn down at an unprecedented pace during the crisis. The IEA warns that while operations can continue without full reserves, the market may become more susceptible to price volatility. Increased volatility carries significant economic costs; every $5 rise in oil prices translates into approximately $190 billion in additional annual global expenses.

Efforts to replenish strategic stocks, already a costly endeavor, have become more expensive in light of the conflict. The European Central Bank’s June report revised its 2027-28 oil price forecasts upward, projecting averages between $65 and $75 per barrel, compared to previous estimates near $63-$64. Based on current Brent prices, rebuilding reserves consumed during the crisis could require expenditures exceeding $70 billion.