Saul Kavonic, senior research analyst at MST Marquee, likens the current market state to living on a credit card. For months, aggressive releases from strategic reserves and a temporary dip in Chinese demand masked the reality of supply lost in the Persian Gulf. Those mechanisms are now failing. Shipments through the Strait of Hormuz have plummeted to roughly one-third of pre-war levels, with only 5 to 7 million barrels per day currently clearing the region.

Saudi Arabia has attempted to mitigate these losses by utilizing ship-to-ship transfers off the coasts of Oman and the UAE, yet this workaround remains fragile. Meanwhile, the International Energy Agency’s previous inventory releases have left U.S. Strategic Petroleum Reserve levels at their lowest since the early 1980s. With China beginning to ramp up imports again, the primary demand-side constraint that kept prices from spiking in the spring has evaporated. Given the lack of a diplomatic breakthrough, Kavonic suggests the market is bracing for a period of tightening supply and heightened risk.