{"id":57087,"title":"Energy markets face prolonged crisis as Hormuz flows collapse","publisher":"Stockmark.IT","author":"Stockmark.IT Website","published":"2026-08-20T06:31:24+00:00","modified":"2026-08-20T06:31:24+00:00","canonical_url":"https://stockmark.it/hope-fades-traders-brace-for-extended-oil-lng-squeeze/","markdown_url":"https://stockmark.it/hope-fades-traders-brace-for-extended-oil-lng-squeeze.md","json_url":"https://stockmark.it/hope-fades-traders-brace-for-extended-oil-lng-squeeze.json","category":"Business","categories":["Business","Energy","Financial"],"featured_image":"https://i0.wp.com/stockmark.it/wp-content/uploads/2026/08/energy-markets-face-prolonged-crisis-as-hormuz-flows.png?fit=1536%2C1024&quality=80&ssl=1","format":"news","language":"en-GB","content":"Commodity traders are increasingly abandoning their optimism regarding a swift resolution to the conflict in the Middle East, as physical supply constraints begin to outweigh geopolitical rhetoric. For the past six months, market participants have largely accepted statements from President Donald Trump concerning peace negotiations and military victories at face value, betting on a rapid end to hostilities. However, the reality of the physical market is diverging sharply from these expectations. A diesel shortage that has been developing since the spring is now becoming significantly more severe, with demand set to rise further during the autumn and winter months. While the squeeze in other fuel types has been less pronounced, the underlying issue remains the same: both the Middle East and Russia were major exporters of refined fuels until the war disrupted these supply chains.\n\nThe scarcity is not limited to refined products; crude oil supply is also under intense pressure. Traders are now pricing in an extended crisis, suggesting that diplomatic efforts are losing their effectiveness. Data from Kpler indicates that oil flows through the Strait of Hormuz have averaged approximately two million barrels per day recently. This represents a dramatic decline from the July average of 4.8 million barrels per day and a stark contrast to pre-war levels of 18 million barrels per day. Consequently, tanker traffic through this critical chokepoint is currently barely 11 per cent of what it was before the United States and Israel launched strikes on Iran. Attacks on tankers continue, and rhetoric from both Washington and Tehran has hardened. Iran has threatened to break the U.S. naval blockade with precise strikes, while President Trump maintains that the strait remains open. Tanker-tracking data, however, supports the Iranian position that the route is effectively shut down. Both sides appear to agree that no peace talks are currently taking place, reinforcing the perception that they are preparing for a prolonged confrontation.\n\nAnalysts warn that focusing solely on Brent crude prices provides an incomplete picture of the crisis, which is fundamentally a problem of fuel availability. Jeff Currie noted that crude oil is not consumed directly by end users, meaning futures prices may not accurately reflect the physical supply and demand situation for the fuels the world actually uses. Although Brent crude is trading at $91 per barrel, the physical deficit is more severe. Iran’s oil exports have shrunk from 1.7 million barrels per day last year to 294,000 barrels per day since the start of August. Total oil exports from the Middle East have averaged 9.5 million barrels per day this month, down from 21 million barrels per day in 2025. The International Energy Agency has revised its forecast for global oil supply to drop by 4.3 million barrels per day for the full year, a more pessimistic outlook than its earlier estimate of a 3.7 million barrel decline. This translates into a supply shortfall of 1.27 million barrels per day, a deficit that will likely drive up crack spreads and end prices for gasoline, diesel, and jet fuel.\n\nMiddle East producers are attempting to mitigate the impact of the Hormuz bottleneck. Saudi Arabia has redirected its exports, and the United Arab Emirates has boosted its own shipments, with August figures exceeding the average for the previous year. However, the UAE recently accused Iran of launching two ballistic missiles against its territory, raising concerns about the safety of Emirati tankers in the strait. ADNOC tankers have frequently been targeted by Iranian strikes, and any new pipelines designed to divert flows away from Hormuz would take years to construct. What was initially viewed as a short, sharp squeeze on oil and gas has evolved into a full-blown crisis with no immediate end in sight. Both the United States and Iran are experiencing economic pain from the war, yet both appear determined to endure it for an extended period. Until one side yields, the energy squeeze is expected to deepen further, with significant implications for the broader economy as energy costs form the foundation for all other expenses."}