Mirage of Resilience: How Hormuz Initially Disrupted without Dislodging Energy Markets

Despite the unprecedented severity of the disruptions it brought in its wake, global energy prices during the ongoing Middle East conflict’s first phase (stretching from the 28th of February through to the announcement of the ceasefire on 7th of April, until the breakdown of the MoU and resumption of hostilities in early July)^[1] did not breach the upper limits that most assessments anticipated at the start of the crisis. This essay seeks to highlight the reasons underpinning this apparent resilience of the global energy system, and enquires into whether the reasons are systemic enough to remain relevant – and effective – for the next iteration of this conflict triggered by the concomitant closure of the Bab el Mandeb.

Backdrop: Containment of a Shock

The supply chain crisis triggered by the blockade of the Strait of Hormuz and the broader conflict in the Middle East resulted in an unprecedented energy supply disruption globally. This was an expected outcome of blockades along a waterway through which a fifth of global energy trade – including 15mn bp/d of oil and nearly 5.5mn bp/d of refined products and derivatives – had been passing until 28th of February 2026.^[2] The impact on Asia,^[3] which imported nearly 60% of its crude requirements from the Middle East in the lead-up to the crisis, was particularly dire. Governments resorted to multiple measures, including rationing and demand suppression, in addition to swiftly seeking out alternative energy supplies from a diversified basket of exporters outside of the Middle East. Contradistinguished to the previous energy shocks – including the Arab Oil Embargo and the one emerging from the Russia-Ukraine conflict of 2022, this particular energy shock was compounded by the fact of it being a multi-commodity supply disruption which cascaded across multiple industries, production value chains and growth indices globally.

Despite this debilitating impact of the supply crunch triggered by the conflict, the first phase of the Iran War did not see the catastrophic price highs and mass shutdowns of import-dependent economies that were projected when the conflict first began in early Spring this year. Oil prices had risen to a whopping $127/barrel – an increase of more than 40%- a month into the Russia-Ukraine conflict in 2022. In contrast, Brent crude saw highs of $101-102/barrel and gas prices stood at $4/gallon in the initial phase of the Middle East conflict, notably did not touch (and, are yet to even 6 months into the conflict) the $200 that had been anticipated. At its peak, the conflict in the Middle East is estimated to have put nearly 14% of global energy supplies out of circulation.^[4]  Yet, in the case of the disruptions emanating from the Middle East conflict in general and the blockade of the Strait of Hormuz in particular, despite the slowdown of industrial production, a disruption of agrarian calendars and considerable human security fallouts, countries appear to have reasonably withstood the vortex of instability that the conflict generated despite the debilitating pain points through it all.

What Cushioned the Shock?

The reasons for anticipated price highs not being reached, and the ability of import-dependent countries to better weather the disruptions during the first phase of this conflict may be sought in the following structural and behavioural flexibility markers –

Energy ‘glut’ – Global oil markets looked qualitatively different on 28th February 2026 than they did on 24th February 2022 in the run-up to the Russia-Ukraine conflict. The margin for flexibility was a restricted one in the months before the conflict of 2022 began. Conversely, International Energy Agency (IEA) forecasts for 2026 anticipated an ‘energy glut’ with oversupplied markets due to factors such as muted industrial activity globally combined with new production and export facilities bringing more oil and gas into the markets. IEA estimates suggest that there was an oil supply glut that stood at nearly 3.7-4mn bp/d heading into 2026. These stocks kept the energy markets well-cushioned in the lead-up to the crisis.

Additionally, the energy export cargo that was already on the water on February 28th, would have taken nearly a month to get to all of their respective destinations simply by virtue of the normal time it takes for transit. Further, substantial quantities of Russian-sanctioned oil were indicated to have still been available on the water at the time, and large energy importers like India bought up significant shares of it as the US announced exemptions to the sanctions regime on Moscow’s energy exports as the conflict began in the Middle East.^[5] This floating storage buffer led to a balanced supply-demand dynamic and allowed for existing global production to be rewired and re-routed so as to cushion the initial supply losses that the closure of Hormuz caused.

Release/Drawdown from Strategic Petroleum Reserves (SPRs) – The drawdown from global strategic reserves was among the most fundamental and effective shock absorbers in the first phase of the conflict. On 11th of March 2026, IEA member countries committed to a coordinated release of 400mn barrels from their strategic petroleum reserves to add to global energy markets in order to fill the gap created by lost Middle East barrels.^[6] While the measure stabilised markets for some time, it must be noted that it was more through an injection of improved sentiment than any massive volume supplementation that this measure really achieved, given that the addition to global energy markets in real terms was only 2.5mn b/d, which, when contextualised against the 105mn bp/d average of global consumption per day is a very modest amount. Despite the comparatively marginal contribution to final numbers, the SPR release did help fill some of the losses from the nearly 15mn bp/d that were no longer coming from the Middle East via Hormuz into global energy markets.

Optionality of Sources and Routes – Countries, particularly in Europe and in Asia, had learnt two important lessons in the wake of the Ukraine War – the need to diversify their energy import baskets and to be prepared for largely arbitrarily imposed sanctions regimes that could hold countries hostage over their trade preferences regardless of whether they had had any role to play in the start of a conflict or not. This led to a degree of flexibility in the energy security approaches of many of these countries when the present crisis hit. While production and export increases from countries like the US, Venezuela, Kazakhstan, Nigeria, Argentina, Brazil,  Canada, and Guyanavii in particular, helped many countries offset some of the lost supplies from the Middle East, Gulf energy exports through the bypass routes of Saudi Arabia’s East-West pipelineviii and UAE’s ADNOC Habshan-Fujairah pipelineix saw close to 5.5-7mn bp/d (as compared to the very conservative numbers of 3.5mn bp/d and 1.3mn bp/d that was being moved through these pipelines respectively before the start of this conflict) held together another end of the source diversification story during this first phase.

China’s role as a swing consumer – For more than 2 decades (2003-2023) China has been responsible for driving nearly 50% of global oil demand.  At 11.5mn b/d China ranks as the world’s largest importer of oil. It also holds the largest global SPR inventory at close to 1.4bn barrels. Given these numbers, China’s role as a consumer that can voluntarily cap or increase its oil imports can have a dramatic impact on the health of global energy demand and consumption parameters. At the start of the Middle East conflict, China reduced its purchases to nearly 6mn b/d(June 2026 numbers) reduction of imports freed up the availability of around 5.5mn b/d barrels for other countries, particularly in Asia. Notably, this reduced purchase of seaborne oil was accompanied by domestic mandates that curtailed imports from China’s own ‘teapot refineries’ production.^[10] China was also uniquely well-positioned to leverage its access to both Iranian oil exports during the start of this conflict,^[11] and that arguably would have helped supplement the stockpiling the country could do without having to compete for the scarce supplies available as the blockade worsened. A similar advantage Beijing was also able to capitalise upon is its geographic proximity to Russia’s eastern seaports and the pipeline infrastructure between the two countries. These points of access have facilitated China’s non-compliance with the sanction regime against Moscow’s energy exports, and allowed it to access Russian crude relatively easier than most other importersxii.

Industrial activity in the country during the early months of 2026 was indicated to have been slowing, with the supply disruptions emerging in the Middle East beginning to have a cascading impact on other industries and global consumption patterns as well. China’s own production numbers, as a primarily export-oriented manufacturing economy, could reasonably be expected to be depressed because of this. It is also important to consider that the Chinese pattern of seaborne oil imports was also tied to the need to fill their SPR with inexpensive fuel available in the market at a time of no duress. As the conflict in the Middle East began, Beijing halted this effort, and this again led to more oil in the markets for other importers to access.^[13]

Cumulatively, all of these factors led to China emerging as a crucial swing consumer at the start of the crisis, and allowed for some of the shock to global energy supply to be absorbed effectively.

Finally, China’s integrated regulatory and industrial planning also meant that the electrification that the country had been investing in served as a very effective mechanism to fall back on when oil imports started getting expensive. Cumulatively, all of these factors led to China emerging as a crucial swing consumer at the start of the crisis, and allowed for some of the shock to global energy supply to be absorbed effectively.

Backwardation and pricing in of optimism – In the lead-up to the crisis in the Middle East, President Trump had come to acquire the moniker of being someone who may fold easily, and recalibrate and retract his approach depending upon his most recent assessments and preferences. The Liberation Day tariffs and the trajectory of negotiations surrounding them had a significant role to play in the building of this perception. This allowed for the markets to build in a certain degree of optimism in the hope that the Middle East crisis too would not really last for too long. This was reflected in the backwardation that the markets exhibited with spot markets prices being high while the futures price remained conservative. This was more the function of optimism of a speedy redressal of the issues that had triggered the conflict in the first place, as well as perhaps the overtly simplistic assumptions about how long an Iran grappling with 4 decades of debilitating sanctions would last in the face of the largest and most advanced military in the world.  Arguably, the reason the markets absorbed the initial shock better and factored it into relatively conservative energy price spikes was because there was an implicit belief that Hormuz would reopen shortly and energy flows would return to pre-February 28th levels soon enough.

Demand slowing/contraction – The loss of oil and other feedstock from the Middle East cascaded into industrial processes elsewhere, leading to substantial production halts across countries.^[14] Additionally, governments across South and Southeast Asia, in particular, used both mandates, rationing and incentives to recalibrate consumer behaviour and thereby, national energy consumption, temporarily. These sound like small measures when considered in isolation. Cumulatively, however, they add up to a sizeable portion that allow governments and oil companies a degree of flexibility and time to enable procuring comfortably. This was a pattern that played out prominently across Asia, including in China and India – among the largest energy demand generators in the global economy today. This fact of changed demand patterns had an impact on global energy demand impulse. While the energy need was still being met either from alternative geographic sources or from localised forms of energy including domestic coal and renewables, this contraction of demand had a salutary impact on global energy markets in the first half of the conflict.

Renewable energy options as supplements – In addition to China’s successful integration of electrification into the domestic energy basket, an increased share of renewable energy options played a notable role in offering an alternative to imported fuel, during this conflict. Admittedly, the contribution of renewables was not large enough to supplant the demand that oil and gas meets in the energy basket of countries. Yet, the existence of this option allowed for a modicum of redundancy within national energy security architectures in a manner that helped cushion the loss of the Middle East barrels.

A Contained Crisis or a Deferred one?

Understanding if these measures succeeded because they were propitiously timed or if they were the function of any real longer-term structural configurations and adoption patterns, would help identify if the ability of global energy markets to withstand the disruption without catastrophic meltdowns was a function of systemic resilience. Should they indicate systemic resilience, it stands to reason that these factors and measures persist and prove as effective in the face of another disruption or even in answer to a continued disruption such as the ongoing Middle East crisis. It may be instructive to consider this hypothesis against the backdrop of the recent uptick in tensions in the region that has been impacting energy markets globally again.

In September 2026, six months into the Middle East conflict, the Houthis in Yemen managed to engineer a blockade of the crucial Bab el Mandeb in a retaliatory strike against the Saudis. The waterway served as the crucial outlet that allowed route optionality for the region’s oil exports to flow through the East-West pipeline into the Red Sea and thereby bypass the troubled Hormuz. This act by the Houthis has effectively put in place a double chokepoint that represents a worst-case scenario in any energy security discourse. Uninterrupted access to the Red Sea had emerged as a lever of redundancy which aided in cushioning the oil disruptions since the crisis began. The physical interdiction that the Houthis have now put in place in the Bab el Mandeb supplements the ongoing blockade in the Hormuz by the Iranians and the Americans. The immediate fallout of this is reflected in elevated energy prices globally and increasing concerns of a worsening supply crunch.

The levers that worked to cushion the disruptions when only Hormuz was blocked, no longer carry the same potency as they did during the first phase of this conflict.

Many of the bulwarks that allowed the global economy to largely absorb the shock during the first phase of this conflict are not likely to work in the face of this double chokepoint primarily because they have, in varying measures, either been attacked themselves or have begun depleting. For instance, the alternative pipelines that afforded the Gulf energy exports route optionality have now been attacked. Similarly, the release from Strategic Petroleum Reserves, which played an important role in blunting the supply disruption in the first phase of the conflict, is not a tool that commends itself to repeated use. This is primarily because oil drawdowns from strategic petroleum reserves without sustained replenishment change the chemistry and the physical and structural properties of the storage itself. This has already begun happening with the SPRs of many countries, including the US, where storage inventories were indicated to be at historic lows of 293.4mn barrels,^[15] having started from 400mn barrels at the end of 2025, as the conflict in the Middle East reignited around late August.

The levers that worked to cushion the disruptions when only Hormuz was blocked, no longer carry the same potency as they did during the first phase of this conflict. Markers from the second phase of this crisis appear to indicate that the success of most of these measures may have been more a function of a conducive circumstance and impressive flexibility on the part of governments than the function of any unshakeable fortitude.

Conclusion

Optimism comes with an expiry date, especially when events stop corresponding to any rational actor model calculus. The multiple layers of complexity the conflict in the Middle East has been acquiring makes it difficult for businesses and countries to believe a lasting resolution is around the corner anytime soon. Such an assessment can reasonably be expected to dilute the ability and willingness to absorb higher risk premiums seen during the first phase. The resilience demonstrated during the first phase of this conflict, as alluded to previously in this paper, was also a function of the expectation that the conflict was a short-term one – more of a shock and awe variety than one that would be protracted, simply because the Strait of Hormuz and the Middle East were too vital to the health of the global economy to be allowed to remain disrupted indefinitely. This expectation, sadly, has collided against the unforgiving circumstance of geopolitical contestation and a security environment that has only worsened over the last six months, and wherein off-ramps are becoming exceedingly difficult to conjure up – much less access.

This commentary originally appeared in Politea Research Foundation.