Oil Market Loses Its Safety Net as Iran Conflict Reignites
The global oil market faces heightened vulnerability as renewed conflict in the Middle East closes the Strait of Hormuz, eliminating the buffers that previously cushioned price spikes. After weeks of complacency following a U.S.-Iran memorandum of understanding, the strait's re-closure has driven oil prices to $90 per barrel. Strategic and commercial inventories worldwide, including the U.S. Strategic Petroleum Reserve at its lowest since 1983, have been drained during earlier phases of the war. The IMF warns that with spare capacity deployed, demand compressed, and inventories drawn down, the world has little room to absorb further shocks. China has tapped its stockpiles and reduced imports to a decade low. Analysts from ING note that SPR releases are set to cease by the end of July, leaving the market exposed to further price rallies during peak demand season.
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