Dwindling Oil Reserves Threaten Energy Market as Strait of Hormuz Remains Closed

The International Energy Agency has spent nearly three months sounding an alarm that grows louder with each passing week. What began as a warning about an unprecedented energy shock—the closure of the Strait of Hormuz following the outbreak of war between the United States and Iran—has evolved into something more urgent: a countdown against the depletion of the world's oil reserves.

When the strait closed, importers had a buffer. They drew down accumulated inventories, the oil already in transit, and supplies stored on floating vessels. These reserves were meant to absorb the initial blow. But as weeks turned into months, that cushion began to thin. The International Energy Agency released 400 million barrels from strategic reserves in March, the largest such release in its history. By May, the agency reported that global crude reserves had fallen by 246 million barrels since the conflict began—a rate of decline without precedent. Goldman Sachs calculated that exports from the Persian Gulf had collapsed to just 5 percent of normal levels, and that global reserves were shrinking by 8.7 million barrels daily.

The math is unforgiving. Commercial reserves—the oil held by refineries and storage facilities, not governments—stood at roughly 2.8 billion barrels before the war. They are now approaching a critical threshold of 2 billion barrels, the point at which market pressure begins to force prices upward and demand destruction follows. Kpler, an energy consulting firm, put it plainly: the safety buffers have been exhausted. What remains is the last line of defense. The IEA has committed to releasing at least another 210 million barrels from government reserves through the end of July, and has signaled willingness to release more if necessary. But even these measures are finite.

China presents a counterpoint. For years, the country has built reserves countercyclically, buying when prices were low. Its crude stockpile now sits at nearly 1.24 billion barrels—a historic high—and has actually grown by 25 million barrels since the conflict began. The OECD nations, by contrast, face a narrowing margin. Under the agreement that created the IEA in 1974, member countries committed to maintaining strategic reserves equivalent to at least 90 days of net crude imports. That commitment is being tested.

Kerstin Hottner, a commodities manager at Vontobel, does not yet call the situation alarming. She estimates that roughly three-quarters of the committed 400 million barrels have already been released, and notes that a second tranche of similar size could be deployed if needed. But she adds a crucial caveat: even if the Strait of Hormuz reopened tomorrow, it would take five to six weeks for crude shipments to reach destinations like Europe. The reserves exist to bridge that gap. If peace does not arrive soon, she warns, the situation would become genuinely concerning. The strategic cushion would be limited, and any future supply disruption—another flare-up of the conflict, a hurricane in the Gulf of Mexico, any number of unforeseen events—would find the world with far less room to maneuver.

Jorge León, an analyst at Rystad Energy, echoes this concern. The OECD still has considerable reserves once the 400-million-barrel release is complete. But if the decline continues, the fundamental purpose of strategic reserves comes into question. These stockpiles exist precisely to protect against future crises. The precedent is recent: in 2005, after Hurricane Katrina devastated Gulf of Mexico oil infrastructure, the United States tapped its reserves to compensate for the lost production.

The path forward is complicated by mathematics and time. Chris Wright, the U.S. Secretary of Energy, has already noted that for every barrel released, the country may ultimately need to purchase approximately 1.2 barrels to replenish reserves. April exports from the U.S. reached a record 156 million barrels—far above the 2025 monthly average of 115 million—driven partly by these strategic releases. The effort to rebuild reserves once the conflict ends will itself keep oil prices elevated for months to come. A peace agreement between Washington and Tehran is expected within days, according to current expectations. But even that resolution will not immediately restore the world's energy cushion. The real test will come in the weeks and months after, when the market must simultaneously manage the return of supply and the slow, expensive work of rebuilding the reserves that have been drawn down.