Global energy markets weather Hormuz closure with reserves and demand cuts

More than four months after the Strait of Hormuz effectively closed to commercial shipping, global energy markets have avoided the catastrophic shortages many analysts feared, as governments and industry players deployed a combination of strategic reserves, demand reduction, and regulatory flexibility to manage the worst supply disruption in decades.

A Multi-Pronged Response

The strait, which carries approximately 21% of global oil supply and 25% of LNG trade, has seen tanker traffic drop to near zero since the U.S.-Israeli conflict with Iran began in late February. As of Thursday, just two tankers had transited the strait in early hours, according to Reuters ↗ 0.75%, as renewed U.S. airstrikes on Iran escalated shipping risks.hormuzstraitmonitor+1

The Trump administration authorized the Department of Energy to release 172 million barrels from the Strategic Petroleum Reserve in March, part of a broader International Energy Agency agreement to release up to 400 million barrels from global reserves. The SPR has since fallen to 319.5 million barrels — its lowest level since April 1983. Total U.S. crude inventories, including commercial stockpiles, have dropped by more than 111 million barrels since the conflict began.reuters+3

On March 17, the Department of Homeland Security issued a Jones Act waiver allowing foreign-flagged vessels to transport oil, natural gas, and other energy commodities between U.S. ports. The waiver, initially set for 60 days, was extended by 90 days in April and now runs through August 16.shippingandfreightresource+3

China's Demand Destruction Cushions the Blow

Perhaps the most consequential factor has been China's dramatic reduction in crude imports. According to customs data reported by Bloomberg, Chinese crude imports fell to 7.8 million barrels per day in May — the lowest since October 2017 — down from an average of 11.6 million barrels per day in 2025. By June, imports had fallen further still, with total petroleum demand down roughly 6 million barrels per day compared to pre-crisis levels, according to commodity analysts Kpler.anasalhajjieoa.substack+1

The Wall Street Journal News Corp ↘ 13.24% reported that China's import reduction has played a crucial role in stabilizing oil prices and sustaining global economic momentum.wsj

Satellite Tracking and the Road Ahead

Digital ship-tracking and satellite imagery have become central to monitoring the crisis, with firms like TankerTrackers.com using these tools to verify vessel movements through contested waters. A peer-reviewed study documented a 97% decline in shipping transits through the strait using satellite radar and AIS data.bloomberg+2

With governments now planning to buy millions of barrels through 2028 to rebuild depleted reserves — potentially adding up to 664,000 barrels per day of demand by the third quarter of 2027 — the crisis continues to reshape global energy flows even as peace talks with Iran remain unresolved.reuters