Investing.com — The global energy market is facing a structural crisis as the conflict in the Middle East effectively chokes off one of the world’s most critical maritime arteries.
According to a new “Global Energy Weekly” report from BofA Global Research, oil and product movements through the Strait of Hormuz have collapsed from roughly 20 million barrels per day (mb/d) to under 2 mb/d.
Analysts warn that if these disruptions persist for more than a few weeks, the world risks a supply chain breakdown reminiscent of the severe energy crises of the 1970s.
Strategic deficits and price reshuffling
Global oil prices have not yet fully reflected the magnitude of the shock, largely due to emergency stock releases and “oil still at sea”, but satellite data indicate a rapid tightening of the market.
BofA has significantly revised its baseline forecasts to reflect a longer conflict, now factoring in a massive 4 mb/d supply deficit for the second quarter of 2026. Consequently, the firm has elevated its Brent crude average forecast for the year to $92.50 per barrel.
The report highlights a growing divergence between producers and consumers. While stocks are building rapidly within Gulf producer nations unable to export, consuming countries are drawing down inventories at an unsustainable pace.
Limited supply offsets are available via Saudi and UAE pipelines. BofA suggests that a prolonged shortfall would necessitate a 4% to 5% year-over-year contraction in global energy demand.
Demand rationing and the “broken” supply chain
The lack of immediate alternatives to oil, particularly in the transportation and petrochemical sectors, poses a significant risk of “demand rationing.” BofA analysts argue that the market’s current complacency, rooted in the hope of a short war, may soon give way to extreme price volatility.
If the conflict extends beyond the next 2 to 4 weeks, the global oil supply chain may reach a breaking point, forcing a mandatory reduction in energy consumption to balance the market.
Institutional investors’ primary concern is no longer just price, but physical availability. The “reshuffled” energy flows are creating a “stagflationary” drag on global growth, as the high cost of energy is compounded by the physical inability to move product to key refining hubs.
Markets are now closely monitoring whether emergency international intervention can restore maritime security before the inventory buffers in consuming nations are completely exhausted.
https://www.investing.com/news/economy-news/global-oil-supplies-at-risk-of-1970sstyle-breakdown-as-hormuz-flows-plummet-4597569
