The Oil Market Absorbed The War Shock, But Buffers Are Running Low

Eurasia Review  |  Jean-Marc Natal, Azim Sadikov

The closure of the Strait of Hormuz during the Middle East conflict cut off 20 million barrels of oil per day, yet global prices stabilized between $90 and $100 per barrel due to unexpected market buffers. This massive disruption, representing a fifth of global consumption, initially threatened to trigger a severe international economic crisis.

Prior to the escalation, global oil supply exceeded demand by two million barrels daily, providing an essential initial cushion. To offset the shortfall, Saudi Arabia and the United Arab Emirates redirected limited volumes through alternative pipelines to the Red Sea and Fujairah. Meanwhile, demand compression in Asia, increased production from the United States, and massive drawdowns of strategic reserves prevented a catastrophic price spike. However, these emergency measures have depleted global inventories close to their operational minimums, leaving the global economy highly vulnerable to subsequent supply shocks.

Comment

The Indian Navy maintains continuous deployments in the Gulf of Aden to secure vital trade routes. These operations rely heavily on real-time maritime domain awareness from the Information Fusion Centre-Indian Ocean Region. Escort missions by INS Kolkata demonstrate the high cost of protecting commercial shipping from asymmetric threats. Diversified supply corridors remain essential to mitigate prolonged chokepoint disruptions.

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