On February 28, 2026, military operations conducted by the United States and Israel triggered the Iran conflict, leading to the effective closure of the Strait of Hormuz. This narrow waterway carries approximately 20% of global oil shipments. Following the disruption, energy supply quickly became a major concern for global markets.

According to the latest EIA data released on Wednesday, US crude oil and petroleum product inventories declined by 10.6 million barrels last week, pushing total inventory levels to their lowest point since 2004. At the same time, crude oil futures have already begun moving significantly higher, with analysts warning that oil prices could face a sharp upward surge.

Since the outbreak of the Iran conflict, approximately 10% of the US Strategic Petroleum Reserve (SPR) has been released. Some analysts argue that US commercial crude inventories have effectively erased all of the inventory gains accumulated earlier in 2026, and that this reversal occurred in just five weeks. The large-scale SPR release has, to some extent, masked the true severity of the domestic supply shortfall.

The United States has released approximately 50 million barrels of crude oil from the Strategic Petroleum Reserve, reducing SPR holdings by 12% to 365 million barrels, the lowest level since April 2024.

Meanwhile, inventories at Cushing, Oklahoma — the pricing hub for West Texas Intermediate (WTI) crude — have fallen from approximately 33 million barrels two months ago to around 24.5 million barrels today, approaching the operational minimum level of roughly 20 million barrels.

The operational minimum does not mean inventories are empty. Rather, it represents the minimum volume required to keep pipelines, refineries, transportation networks, and storage infrastructure functioning properly. Once inventories fall below this threshold, supply-system flexibility effectively disappears, making nonlinear price spikes inevitable rather than merely possible.

The Root Cause Remains the Strait of Hormuz

The closure of the Strait of Hormuz has already caused what many analysts describe as the largest disruption in oil market history, reducing global oil supply by more than 10 million barrels per day during March.

Global oil production is expected to decline by 6.9 million barrels per day year-on-year during the second quarter of 2026, marking the largest quarterly decline since the COVID-19 pandemic.

According to EIA data, Brent crude spot prices averaged US$117 per barrel during April, up US$46 from the February average and marking the highest monthly average price since June 2022 during the Russia-Ukraine conflict.

Perhaps most concerning is the absence of a quick resolution.

At a technical meeting held on June 1 at OPEC headquarters in Vienna, consulting firms and market analysts warned that restoring traffic through the Strait of Hormuz to pre-conflict levels could require several months.

The CEO of Abu Dhabi National Oil Company (ADNOC) stated that even if the conflict is resolved, a full return to pre-war traffic volumes through Hormuz is unlikely before the first or second quarter of 2027.

According to scenario analysis published by JPMorgan, global oil inventories stood at approximately 8.4 billion barrels at the beginning of 2026. However, only about 800 million barrels of those inventories could realistically be utilized without creating systemic pressure.

JPMorgan estimates that global inventories could fall to an “operational stress level” of 7.6 billion barrels by June 2026. If the Strait of Hormuz remains largely closed, inventories could decline further to 6.8 billion barrels by September, approaching what the bank describes as the “operational floor.”

Chevron’s CEO warned that oil prices may soon move sharply higher because the market’s “buffer” is rapidly disappearing, reducing its ability to absorb supply disruptions.

Oil Prices Could Continue Rising

Many on Wall Street believe that current oil prices still fail to fully reflect the severity of actual supply-side pressures.

With the Strait of Hormuz still largely closed and President Trump’s visit to China failing to produce a meaningful breakthrough, investors are increasingly being forced to confront worsening supply shortages and the possibility of approaching critical inventory thresholds.

Some US government officials and Wall Street analysts have already begun seriously discussing the possibility of oil prices rising toward US$200 per barrel.

The fact that inventories have fallen to their lowest level since 2004 is historically significant.

However, the more important issue is that inventory levels continue moving lower, and the only realistic condition capable of stopping that decline would be a full reopening of the Strait of Hormuz.

At present, there is still no clear timetable for when that may happen.