Oil markets brace for June as Strait of Hormuz remains closed

The Strait of Hormuz, handling roughly 20 % of global oil supply, stayed effectively closed in May, leaving crude output shut‑in at an estimated 10.5 million barrels per day (b/d) in April and projected to peak near 10.8 million b/d in May【1】. The disruption has already lifted Brent crude to a $117 per‑barrel average in April, $46 higher than February and the highest monthly mean since June 2022【1】.

Supply shock deepens

The closure of the Hormuz corridor has erased about 18.2 million b/d of crude and refined product flows that normally pass through the strait, with Asian importers bearing the brunt—nearly 80 % of Hormuz oil goes to the region, including 5 million b/d to China【1】. U.S. Energy Information Administration estimates indicate that Middle‑East production shut‑ins averaged 10.5 million b/d in April and could rise to 10.8 million b/d in May as storage constraints force curtailments【1】. The International Energy Agency adds that global oil supply has fallen by 12.8 million b/d since the conflict began, with an additional 1.8 million b/d decline in April, leaving total supply at 95.1 million b/d【1】.

OPEC+ output fell to 40.1 million b/d in April, down 1.9 million b/d from March and 11.9 million b/d below pre‑war levels, marking the lowest production in decades for the cartel【1】. Non‑OPEC+ supply rose modestly by 90,000 b/d MoM to 54.9 million b/d but remained 820,000 b/d under pre‑conflict baselines, reflecting losses in Qatar after Iranian attacks【1】.

Market reaction and structural shifts

The physical scarcity of prompt cargoes has widened the gap between Dated Brent and front‑month ICE Brent futures, hurting traders who hedge paper positions with physical crude【1】. Liquidity in Dubai‑linked futures markets has also deteriorated, underscoring how geopolitical shocks quickly permeate both the physical supply chain and financial market structures【1】.

Compounding the supply crunch, the United Arab Emirates announced its exit from OPEC effective May 1, 2026, a move that could further erode the cartel’s coordination and shift balancing responsibilities to non‑OPEC producers, notably U.S. shale operators【1】. Meanwhile, a temporary U.S. Treasury waiver allowing the sale of certain Russian‑origin crude—originally set to expire on April 11—has been extended, providing a limited outlet for Russian exports amid the Middle‑East disruption【1】.

Analysts warn that the “risk premium” attached to Middle‑East oil is likely to persist, suggesting that the current shock is far from over【2】.

What to watch

• OPEC+ meeting scheduled for early June, where production adjustments could be announced.
• Expiration of the U.S. Treasury waiver for Russian crude (currently extended beyond April 11).
• Updates on the UAE’s post‑exit production strategy and any further attacks on Gulf infrastructure.

The prolonged Hormuz closure forces markets to reckon with a new baseline where uninterrupted Gulf flows can no longer be assumed, raising the likelihood of sustained price volatility and prompting a re‑evaluation of supply‑side risk across the global oil landscape.