The Timing of the Impending Crude Crisis¶
Source: The Timing of the Impending Crude Crisis
Date Published: 2026-05-22 (Amended May 25, 2026)
Author: Robin Brooks & Ben Harris, Brookings Institution
TL;DR¶
Despite a ~20% global oil supply shock from the Strait of Hormuz closure (the largest disruption ever), crude prices have not yet hit catastrophic levels. This is because rapidly depleting temporary buffers are masking the true scale of the crisis. The authors project a timeline: by mid-July all buffers are exhausted, prices could hit $150/barrel, and the shift from a contained shock to a full-blown global recession is mathematically baked in.
The Scale of the Shock¶
| Metric | Figure |
|---|---|
| Pre-conflict crude flow through Strait of Hormuz | ~15 mb/d (up to 20 mb/d with refined products) |
| Global crude oil trade | ~45 mb/d |
| Share of global trade disrupted | ~1/3 |
| Global production (crude + other liquids) | ~100 mb/d |
Conflict Timeline: - Feb 28: U.S. strike on Iran. Flows drop from 15 → 2.5 mb/d - Apr 13: U.S. blockade begins. Flows drop further to 1.5 mb/d
"This ranks as the biggest supply disruption ever."
Why the Shock is Contained (For Now)¶
The market is a race between temporary buffers and expectations for the duration of the closure.
Structural Adjustments (Permanent)¶
Can persist indefinitely: pipeline bypass routes, new crude sources, pre-existing supply surplus. Total: ~6.4 mb/d
Temporary Buffers (Rapidly Depleting)¶
| Buffer | Size | Depletion Timeline |
|---|---|---|
| Russian floating stocks | ~1.6 mb/d | Depleted by end of April |
| Iranian floating stocks | ~1.3 mb/d | Depleted by end of May |
| IEA emergency release | ~2.5 mb/d | Depleting by July 9 |
The Countdown¶
- By mid-July: All temporary buffers exhausted
- Total market adjustment required: 7.1 mb/d (~16% of global crude trade) must be absorbed by price increases or demand destruction
Price Projections (Brent Crude)¶
| Scenario | Projected Price |
|---|---|
| Expected 10% supply decline by June | ~$120/barrel |
| Market prices in complete buffer exhaustion | ~$150/barrel |
"Once markets expect the temporary buffers will be exhausted, the market price could rise to nearly $150 per barrel."
Key Risk: Non-Linear Price Spikes¶
The authors emphasize the potential for sharp, discontinuous jumps as the market reprices duration risk the longer the blockade continues. If the Strait of Hormuz does not reopen by late June/early July, extreme volatility is baked in.
Key Takeaways¶
- The Strait of Hormuz closure is the biggest oil supply disruption ever, cutting ~15 mb/d of flows
- Temporary buffers (floating stocks, IEA releases) are masking the true severity — but they'll be gone by mid-July
- Structural adjustments only offset ~6.4 mb/d, leaving a 7.1 mb/d gap
- Brent crude could hit $120–$150/barrel as markets reprice duration risk
- The potential for non-linear price spikes grows the longer the blockade continues