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Akbar Novruz

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At the FT Commodities Global Summit in Lausanne, leading figures in global commodity trading delivered a stark assessment: the closure of the Strait of Hormuz is not a short-term disruption but a structural shock whose consequences will reverberate across global supply chains for years. From oil refining to food production, the cascading effects are already being felt, AzerNEWS reports.

The scale of disruption is unprecedented. Since late February, when the United States and Israel launched strikes on Iran, roughly 12 million barrels per day have effectively been removed from the global oil balance. Energy infrastructure across the Persian Gulf has been damaged or halted, paralyzing critical export routes.

According to Russell Hardy, the cumulative loss is approaching historic levels. “We have already lost 600–700 million barrels,” he noted, warning that a total loss of 1 billion barrels is now “practically inevitable.” Even if flows resume, he stressed, restoring damaged infrastructure will be a prolonged process.

The magnitude is striking: 1 billion barrels equates to roughly ten days of global oil consumption—more than double the volumes previously released from strategic reserves during past crises. Hardy described the current turmoil as the most severe disruption in his nearly four-decade career, surpassing even the shock of the Iraq's invasion of Kuwait. Unlike in 1990, he emphasized, today’s market operates with minimal spare capacity, much of it concentrated behind the Strait of Hormuz itself.

Beyond oil, the crisis is rippling through multiple sectors. Conference participants warned that prolonged disruption could trigger a broader economic downturn. Fertilizer production is under strain due to interruptions in Middle Eastern gas supplies, raising the specter of a global food crisis. Meanwhile, copper output is being constrained by shortages of sulfuric acid sourced from the Gulf.

“When you remove such a large volume of energy from the system for an extended period, real consequences are unavoidable,” said Gary Pedersen. His colleague, Frederik Lasser, offered a more direct warning: failure to reopen the strait by late July could tip the global economy into recession.

The burden of the crisis, however, will not be evenly shared. According to Richard Holtum, shortages are already most acute across Asia, Africa, and Australia. While soaring prices will impact all economies, wealthier nations are expected to shield their populations from physical shortages. Drawing parallels to Europe’s 2022 gas crisis following the Russia-Ukraine war, Holtum argued that financial resilience—not supply availability—will determine outcomes.

“Rich countries will protect their consumers,” he said. “Those with weaker purchasing power will face demand destruction.”

Despite mounting risks, financial markets appear relatively sanguine. Helima Croft pointed to record-level U.S. stock indices as evidence that investors are underestimating the duration of the crisis, driven in part by expectations that Donald Trump could swiftly broker a resolution.

“There is a perception that Trump can simply end the conflict,” she noted, referencing the market acronym “TACO” (“Trump Always Chickens Out”). However, she cautioned that such assumptions overlook a critical reality: any resolution depends equally on Iran’s position, which remains uncertain.

Even under the most optimistic scenarios, the long-term consequences for the oil products market are expected to be severe. Amrita Sen, the director of market analysis at Energy Aspects, estimates that if the throughput capacity of the Strait of Hormuz is restored by at least 50% by the end of May, the market will still lose 450 million barrels of oil products, including diesel and gasoline.

Sen points out that, due to the lack of spare capacity in the global oil refining sector, restoring this significant volume of fuel will not be achievable before 2030. Furthermore, this timeline depends on whether price increases do not significantly reduce demand in the meantime.