TEHRAN- Geopolitical tensions in the Persian Gulf and disruption of traffic through the Strait of Hormuz have created one of the biggest oil shocks in the global oil market. Based on physical market evidence, the relative stability of oil prices will not last, and with the continuation of disruptions and declining storage, price increases will accelerate.

According to Shana, quoting the OPEC Department of International Forums and Organizations, the United States began a naval trade blockade of Iran on April 13. However, CAS data shows that Iranrelated vessels continue their routes by challenging this blockade, with six of these vessels leaving the Strait of Hormuz on April 21. In total, between April 13 and 21, 78 ships passed through Hormuz, of which 47 were attributed to Iran.

According to a Goldman Sachs report, oil production in the Persian Gulf region has fallen by 14.5 million barrels per day (bpd) — equivalent to 57% — compared to prewar levels (the USIsraeli war against Iran). The base case scenario envisions a quick but not complete recovery of production. Goldman Sachs analysts argue that if the Strait of Hormuz is fully and safely reopened and no further attacks on oil facilities occur, a significant portion of lost output will be restored within a few months.

Three factors support this view: First, reported evidence of physical damage to oil fields is limited compared to LNG facilities. Second, statements by Saudi Aramco CEO Amin Nasser in March suggest Saudi Arabia’s ability to increase production relatively quickly. Third, the history of supply disruptions indicates that Saudi Arabia and the UAE will likely use their estimated spare capacity of over 2 million bpd to stabilise markets during repairs.

* Logistics constraints and operational recovery delays

Despite this relative optimism, Goldman Sachs emphasises significant operational bottlenecks that delay full production recovery. The first constraint is logistics and transport capacity. Unloading oil stored onshore and offshore requires available empty tankers, but it is estimated that empty tanker capacity in the Persian Gulf has fallen by about 130 million barrels (50%). Although historical records show that oil flow through the Strait of Hormuz can increase to 23.3 million bpd (3.3 million above the normal 20 million) and rerouting through pipelines could add at most 3.5 million bpd in spare capacity, the simultaneous need to drain accumulated floating storage and resume exports will put these routes under pressure.

The second and perhaps more complex constraint is the condition of wells and reservoirs. Mandatory production curtailment can create reservoir complexities that require workover interventions before wells are reopened. The report warns that the longer the Strait of Hormuz remains closed, the slower the resumption of production will be, because the need for more extensive workovers, slow supply of consumables such as drill pipes, and continued storagedrainage bottlenecks will delay recovery.

* Full recovery of Iran’s oil production

Although an unprecedented shock is ongoing, Goldman Sachs reviews past production recovery periods (e.g., the attack on Saudi Arabia’s Abqaiq, the Libyan civil war, and the Iran nuclear deal) and notes large differences in the speed and extent of supply restoration. The recovery period of Iran’s oil production after the nuclear deal showed a gradual but relatively complete trend. According to reports, after implementation of the nuclear deal, stable production recovery took 12–18 months, and most production capacity was restored. Compared to other historical shocks such as Abqaiq, this pattern showed a slower recovery speed but greater sustainability due to the lifting of sanctions.

According to the report, the average forecast of institutions such as the US Energy Information Administration (EIA), the International Energy Agency (IEA), and Rystad Energy indicates that the percentage of lost supply recovered three months after reopening will be only 70%, and six months after that it will be 88%. These figures imply a 12% gap even in the most optimistic sixmonth period.
Finally, analysts warn that if tensions resume, the risk of permanent damage to oil production capacity — documented in several of the five previous major supply shocks — will increase seriously. The report concludes that a quick recovery of the majority of production is likely, but full and sustainable restoration faces many technical, logistical, and geopolitical uncertainties.

* Japan’s reaction to sharp energy price volatility

Meanwhile, Japan is facing an unprecedented challenge in crude oil storage and has been forced to release its strategic reserves. With the disruption of tanker traffic through the Strait of Hormuz starting in late February, Japan’s crude oil storage — traditionally importing over 1.7 million bpd from West Asia — has fallen sharply.

Data from the Petroleum Association of Japan show that Japan’s crude oil stocks fell to below 58 million barrels at the end of March, a drop of 4.7 million barrels (7.5%) from February — a drawdown of 150,000 bpd. The downward trend continued in the first half of April, with stocks falling another 2.1 million barrels (about 120,000 bpd), and withdrawal rates are expected to accelerate in the second half of the month.

In response to this supply crisis, Japan’s Ministry of Economy, Trade and Industry announced that from May 1 it will withdraw crude oil equivalent to 20 days of consumption from its national reserves, totalling about 36.5 million barrels. This move is intended to offset the sharp drop in imports from West Asia and the difficulty of securing alternative supplies from other regions such as the United States (where April shipments barely exceeded 400,000 bpd).

The outlook for oil products is also worrying. The Petroleum Association of Japan has stopped publishing weekly oil product storage data due to reporting accuracy problems. Thus, no precise picture of product stock levels exists, but sharply reduced refining runs and continued crude stock draws suggest a likely drop in product stocks. In short, Japan faces rapidly depleting commercial and strategic crude stocks, falling refining output, and opaque product inventory data. Government reserve releases are the only shortterm way to contain the energy crisis caused by the closure of the vital Hormuz artery.

* Brent price forecast raised

After the shock in the Strait of Hormuz, Goldman Sachs raised its Brent price forecast for the fourth quarter of 2026 from $62 to $90 per barrel — a jump of nearly $30, showing how a supply shock pushes oil prices much higher, both through physical stock draws and through changes in longterm expectations. In the first component, the 14.5 million bpd drop in Persian Gulf crude production in April created an unprecedented deficit of 1112 million bpd.

The initial price effect of this supply cut is estimated at $54, but compensatory policies (release of floating sanctioned oil, strategic reserve drawdowns and refills), demand destruction (a 1.7 million bpd drop in global consumption in Q2 due to historic product price spikes), higher supply outside the Persian Gulf (mainly Russia and the US), and alternative pipeline supplies offset $36 of that pressure. Nevertheless, the net loss of 1,236 million barrels from global commercial stocks by the end of 2026 still adds $18 to time spreads and strongly widens the gap between spot prices and longdated contracts.

The second part of the price increase — $9 in longterm prices — stems from eroded confidence in future supply. Goldman Sachs attributes $2 of this to permanent scarring of 500,000 bpd of Persian Gulf production capacity, especially in Iraq. But the larger $7 comes from what is called a security premium. Before the tensions, global spare capacity was 3.7 million bpd, almost all concentrated in the Persian Gulf. Increased market disruption risk discounts that spare capacity. Assuming a risk adjustment of onehalf (halving effective spare capacity), the report adds another $7 to longterm prices — a concept market players call a “fear premium.”

Reports emphasise that risks are skewed toward higher prices. In an adverse scenario, with Gulf exports normalising by the end of July, Brent could touch $100. In a very adverse scenario — if capacity damage reaches 2.5 million bpd (i.e., Hormuz flow does not recover above 70%) — prices could spike to $120. Even in an optimistic scenario with early normalisation, visible global stocks fall to their lowest since 2018, and prices will not stay below $80.

In this environment, Goldman Sachs warns that if the shock is prolonged, the historical linear relationship between stocks and prices will break, making nonlinear price jumps unavoidable. This structure indicates that the oil market has moved from a temporary logistical crisis into a period of redefining a permanent supply premium.

* Diversification of crude supply sources in Asia

Asian countries, following disruptions in oil flow through the Strait of Hormuz, have stepped up efforts to diversify crude supply sources. Even if this vital passage is reopened today, tankers carrying West Asian oil will take about three to four weeks to reach East and Southeast Asian countries — a fact that has heightened energy security concerns in the region.

Indonesia plans to import about 410,000 bpd (150 million barrels in total) of crude from Russia by the end of this year. However, this covers only part of its energy needs, as Indonesia still imports about 1 million bpd of oil. Indonesian energy authorities have stated that besides Russia, they are also seeking crude and LNG from other partners, including the United States. State oil and gas company Pertamina has said its refineries are technically capable of processing Russian crude, and if the government decides, there is no obstacle to using it.

Meanwhile, Japan has decided to release about 36.5 million barrels from its strategic reserves to counter supply shortage risks. This move, equivalent to about 20 days of Japanese oil consumption, comes as Japan sourced about 94% of its imported oil from West Asia last year. The Japanese government has announced it is trying to secure more than half of its oil needs through routes not dependent on the Strait of Hormuz.

South Korea has taken similar steps to reduce its dependence on West Asian oil. The country has secured about 746 million barrels of crude for May — 2.4 million bpd — equal to 87% of its average monthly imports in 2025. As a result, the share of West Asian oil in South Korea’s imports has fallen from 69% to 56%, while imports from the United States and Africa have increased. At the same time, South Korean authorities have expressed concern over the supply of naphtha and downstream petrochemical products such as plastics and packaging materials. Therefore, the country banned naphtha exports from March 27 to preserve domestic supply. With new naphtha cargoes expected to arrive from late April, supply conditions are expected to improve from next month.

* Challenge of sanctions, military strikes, and naval blockade for Chinese refineries

In further global oil market developments with the escalating crisis in the Persian Gulf, the sanctioning of Hengli Refinery on April 24, 2026, marked a turning point in the US economic pressure campaign against Iran. The US Treasury blacklisted the 400,000 bpd private refinery in Dalian for allegedly purchasing billions of dollars of Iranian oil since 2023. This followed sanctions on four smaller independent Chinese refineries, but this time targeted the largest buyer of Iranian oil.

China has been the main destination for Iranian oil since US sanctions were reimposed in 2019. Independent private Chinese refineries (teapots), which are more flexible than stateowned companies, absorbed at least 80% of Iran’s 1.37 million bpd exports in 2025 by buying Iranian oil.

Sanctions had limited effect on independent Chinese refineries before because these units were small and had no direct connection to the US financial system. However, Hengli is a giant petrochemical complex listed on the stock exchange with operations in Chicago. Its blacklisting led to a 10% stock drop and serious problems in opening new letters of credit and secondary sanction risks for conventional oil suppliers. Yet Hengli’s deep dependence on Iranian oil may turn sanctions into a doubleedged sword: free oil sellers will avoid dealing with the refinery to evade sanctions, forcing Hengli to intensify its reliance on sanctioned oil.

In summary, the interaction of three factors — “strong dependence of Chinese refineries,” “intensified extraterritorial financial sanctions,” and “naval blockade” — has created a complex situation. The experience of EU sanctions on the Poland refinery showed that a complete change of crude slate to Russian oil is possible, but Hengli’s huge scale and banking risks make this transition difficult. It seems that the fate of Iranian oil exports to China will ultimately be decided not in the field of paper sanctions, but in the waters of the Persian Gulf and Iran’s ability to maintain its maritime artery.

* A review of the resilience of Iran’s oil industry

While US President Donald Trump predicted that Iran’s oil wells would be blown up within three days of April 26, 2026, and permanently lose half their capacity, technical and historical analysis shows that Iran’s oil industry is far more resilient than to be paralysed by a few weeks of naval blockade. Javier Blas, a Bloomberg analyst, challenges the White House narrative based on oil engineering realities and past sanctions experience.

Before the blockade began, Iran was producing about 3 million bpd of crude and 750,000 bpd of gas condensates — total condensate and natural gas liquids production had reached near a 46year high of 5 million bpd. After subtracting domestic consumption of 1.9 million bpd, a daily surplus of about 1.85 million bpd was going into storage for export.

The US government believed Iran had limited storage capacity and would soon be forced to stop production entirely, damaging its wells. But Kepler estimates that Iran still has 12 to 22 days of empty storage capacity — far more than Washington expected. However, Iran will not wait until the last moment. Historical experience proves this: during Trump’s first “maximum pressure” campaign in 20192020, Iran was forced to cut production, but wells were reopened without serious problems, and Iran resumed production within a few months, bringing it close to a 46year high by 2025.

This successful comeback shows that the technical memory of the National Iranian Oil Company has been enriched by that experience, and the country is now in a better position to withstand a blockade. In short, while a blockade causes economic damage, it will neither destroy Iran’s oil production nor work as the silver bullet the White House seeks to bring Iran to the negotiating table.

* America’s emptiest barrels in history

Following successive crises — from COVID19 and the RussiaUkraine war to climate bottlenecks such as the Panama Canal drought — the vulnerability of vital oil trade routes has become apparent. Now the war in West Asia, as the largest supply shock in modern history, has become a real test for the world’s strategic oil reserves and has shifted attention toward a fundamental rethink of energy security architecture.

According to J.P. Morgan and Goldman Sachs reports, in April alone, global commercial and strategic stocks were drained at a staggering rate of 7.1 million to 12 million bpd. This rapid draw highlights the weakness of the IEA’s 90day stockholding obligation for OECD members. Experience shows that 90 days of storage is not enough for major crises in a world marked by geopolitical upheaval, sanctions, and threats to maritime chokepoints.

Ravi Bhatiani, Executive Director of FETSA, expressed this concern and called for faster reforms in EU storage regulations. The vulnerability of maritime chokepoints is increasingly felt. Indonesia’s plan to impose levies on ships passing through the Strait of Malacca has sounded an alarm. According to Larry Johnson of Mercoria, other chokepoints like the Danish Straits or the Bosphorus could be targeted by similar actions, increasing global supply chain fragility.

In this context, China’s model has attracted attention as a more riskaverse approach. Beijing, with a massive storage programme last year, managed to neutralise the effect of oil loss and Hormuz closure, and is even selling crude from its reserves under current conditions.

In contrast, US strategic oil reserves are near alltime lows. Weekly EIA charts show storage volumes have fallen from over 700 million barrels in the 2000s to below 400 million barrels, and despite Trump’s campaign promise to rebuild them, purchases have been delayed.

The current crisis has also changed attitudes toward how reserves are used. Spencer Dale, former chief economist of BP, suggested at a Financial Times meeting that countries could use strategic reserves not only as emergency stockpiles but also to dampen volatility: “Sell at high prices and buy at low prices.” Such an approach, together with supporting refineries during downturns to maintain spare production capacity, is part of new energy security thinking.

However, refilling reserves is a major political challenge. Andrew Jamieson of Clear Lake Shipping estimates that rebuilding the current global stock draw would take 1218 months, and if target volumes are increased, it could absorb the surplus in the second half of the year and delay price declines. Analysts at S&P Global CERA have also warned that rebuilding storage lines and government demand for emergency reserves would absorb any supply surplus and exacerbate an economic downturn.

Coordinated IEA releases provide a clear picture of the scale of responses: from 60 million barrels in March 2022, to 120 million barrels in April 2022, to a possible 400 millionbarrel release forecast for March 2026. These numbers show the intensification of crises and the need for larger tools.

* Continued pressure on the oil market following the Iran war

The latest US Department of Energy tender to release 92.5 million barrels from the Strategic Petroleum Reserve (SPR) as emergency loans under the IEA coordinated action is a sign of continued market pressure following the war with Iran. The key point, however, is the gap between supply and demand for this oil. In previous tenders, only 63% of offered barrels were taken. This weak reception, despite oil prices rising about 50% since the crisis began, raises serious questions about the effectiveness of the loan mechanism versus outright sales.

Borrowing from the SPR requires companies to return the oil plus “premium” barrels. In conditions of geopolitical instability and the possibility of future price declines, refiners are reluctant to accept the risk of extra repayment. Therefore, simply offering a large volume does not guarantee rapid market entry. The US SPR now stands at about 398 million barrels (about 4 days of global consumption), with a drawdown rate of up to 1.5 million bpd. Yet prices remain above $100. This situation makes clear that reserve releases alone cannot hedge the risk of a sustained supply cut. The success of this policy depends on flexible contract terms and active market participation; otherwise, it is only a temporary analgesic with limited results.

Governments are coming to understand that longterm investment in independent energy sources is an undeniable necessity. The future of strategic reserves is tied not only to storage volumes but also to the ability to use them intelligently to manage volatility and ensure supply security in a world of continuous disruptions.

* World Bank warning on oil’s fragile pulse

According to the World Bank’s Commodity Markets Outlook (published April 28), the oil market is facing severe uncertainty due to the ongoing geopolitical shock in West Asia. The base case assumes that the acute phase of trade disruptions will end by May and that shipping volumes through the Strait of Hormuz will gradually return to prewar levels by October. In this framework, global oil supply in 2026 will fall by about 1.5 million bpd, and Brent crude prices are forecast to average $86 per barrel. Brent for 2026 delivery spiked to around $140 in reaction to heightened concerns, but by April 27 had retreated to the $86 range, exactly matching the base case.

Using IEA data analysis, the World Bank emphasises several key mechanisms. First, price elasticity of supply is significantly higher than previous estimates: a 1% drop in oil production raises prices by up to 11% — almost double earlier studies. This high sensitivity stems from the surge in geopolitical risk premiums at the onset of tensions, where efforts to secure physical storage and speculative behaviour severely roil markets.

Second, the buffer role of commercial and strategic stocks is prominent. The World Bank notes that global stocks, including barrels in transit, will cover consumption well into mid2026. However, oil demand will face a slight decline due to high prices and active consumptionrestriction policies in some countries, deepening the structural weakness in consumption seen in recent years.

The World Bank outlines three risk scenarios. On the upside, if Hormuz shipping disruptions are prolonged but no additional damage to oil infrastructure occurs, Brent will trade around $95. If infrastructure damage is combined with delays in removing trade barriers, prices could spike to $115 per barrel. On the downside, a scenario of price decline to around $70 in 2027 is driven by factors such as fasterthanexpected EV adoption, new negative shocks to global growth, and higherthanforecast supply (mostly in 2027). A quicker resolution of Hormuz disruptions is also mentioned as a downside risk.

The mediumterm outlook points to a gradual return to balance. The World Bank expects supply to recover in the second half of 2026, reaching 108.3 million bpd, and the global supplydemand balance to return to surplus later that year. Nonetheless, a continued geopolitical risk premium and the fallout from a period of severe uncertainty will keep markets fragile. Meanwhile, newly accessible emergency oil stocks in transit and biofuels can largely compensate for a complete halt of exports through the Strait of Hormuz for a few months.

The report concludes that supply shocks of geopolitical origin are inherently the most destabilising type of disruption for commodity markets. An analysis of past crises clearly shows that the oil market is far more vulnerable to the loss of West Asian supply than commonly thought. Therefore, despite the prospect of a return to surplus in 2027, prices will remain subject to sharp fluctuations as long as risks related to the Strait of Hormuz are not sustainably managed.

* Apparent market calm amid escalating macroeconomic risks

While geopolitical tensions continue, energy prices have risen and major central banks (the Fed, ECB, Bank of England, Bank of Japan) are holding meetings. Financial markets have remained fairly resilient, even though the macro narrative has weakened somewhat. Despite this relative calm on the surface, signs of rising hidden pressures can be seen below the surface. Changes in the behaviour of some financial variables suggest that investors are reassessing their outlook for the economy and monetary policy.

Meanwhile, realtime US recession risk indicators show that recession risk remains at somewhat contained levels. This partly reflects continued resilience of the US economy to recent shocks, although the overall global economic environment has become more uncertain. Consumer confidence data present a mixed picture among major economies. While changes in the US have been relatively limited, confidence has fallen more noticeably in the eurozone and the UK, indicating greater sensitivity of those economies to recent shocks, especially in energy.

* Higher energy prices and reduced purchasing power in Europe

A significant part of this difference is due to the direct pressure of higher energy prices on living costs and real household incomes in Europe and the UK. This could further limit household purchasing power and thus negatively affect consumption trends. Credit market developments reinforce this picture. Recent surveys of the European banking system show that lending conditions have tightened, while demand for credit has also fallen — a trend that, if continued, could become a drag on economic growth in the region.

Conversely, some technology sectors are experiencing significant booms. Increased demand for AIrelated technologies has intensified price pressures in this industry, while some supply constraints are emerging due to energyrelated and logistics chain disruptions. Labour market data also show that AI technology expansion is not just a theoretical narrative in markets but is gradually reflecting in real economic structures. Hiring for AIrelated jobs has accelerated in many countries, indicating a structural shift in labour demand patterns.

* Strategic shift of Brazilian crude to Asia

In further energy market developments, Brazilian crude oil exports in the first quarter of 2026 saw a significant jump and have decisively shifted toward Asian markets. Exports to Asia rose by 476,000 bpd to about 1.7 million bpd, a substantial increase compared to the 2025 average. This increase occurred as supply shortages from West Asia created a favourable space for Brazilian barrels to enter the Asian market.

Total Brazilian crude exports in Q1 2026 reached 2.326 million bpd, 348,000 bpd above the 2025 average. Export growth came mainly from mediumgrade crudes such as Mero, Búzios, and Tupi, with almost all grades recording yearonyear increases. The Búzios field, as the main growth engine, played a prominent role with an increase of 81,000 bpd (28%).

The 39% jump in exports to Asia naturally reduced the flow of Brazilian crude to US and European markets. India recorded the highest growth in imports, with Brazilian crude imports rising from 90,000 bpd to 218,000 bpd — a 141% increase. This change is directly linked to the absence of Russian oil imports during Q4 2025 through early 2026, pushing Indian refineries toward Atlantic alternatives.
China remains the largest destination for Brazilian crude, with imports growing 34% to 1.226 million bpd. Besides China, shipments to other Asian markets including Taiwan, Thailand, and Myanmar also increased, indicating Brazil’s growing influence in the region.

In April, Brazilian crude exports remained high at 2.153 million bpd (based on 29 days of data), though slightly below March’s record. Early data suggest continued strong demand from India and likely decent imports from China. However, about 550,000 bpd of April exports still have no final destination.

Overall, these developments show that Brazil, relying on growing offshore field output and flexible export direction, is rapidly filling the gap created in the Asian market and consolidating its position as a key crude supplier to the region.

* Slowing demand growth for transport fuels

In another development, the US war against Iran has raised energy prices and global production costs, sharply slowing global demand growth for transport fuels. Demand growth this year will be only 250,000 bpd, compared to about 640,000 bpd in 2025. If the war ends by next year, a significant demand rebound is possible, driven mainly by increased consumption of middle distillates, especially diesel.

Among fuels, diesel demand will be the hardest hit, falling by 70,000 bpd due to high prices, economic recession, and reduced heavy machinery activity. However, from 2027 onward, growth will return, led by Asia. Jet fuel continues to show the largest growth among fuel types, but with a limited increase of 160,000 bpd. If the Hormuz disruption continues or worsens, supply shortages in Europe could reduce global jet fuel demand. Gasoline is under pressure from high prices, with growth limited to only 100,000 bpd. Reducing nonessential driving will prevent further demand increases. Fuel oil demand is supported in the short term by Asian power plants switching from LNG to fuel oil, but growth will stop by next year as its role in power generation declines.

* How tension in the Strait of Hormuz seized Asia’s demand pulse

As global oil markets grapple with geopolitical uncertainties and trade route shifts, Asian oil demand — especially from its main engine, China — has shown clear signs of weakening and structural change. Reports indicate a drop in China’s crude and product demand in March and April, rooted in a combination of supply bottlenecks, policy interventions, and consumer reactions.

The first blow came from crude imports. China’s imports fell 71,000 bpd in March to 11.8 million bpd, and the demand decline continued to a 12month low in April. The main cause was the Strait of Hormuz crisis after the US attack on Iran on February 28 and Iran’s retaliatory action, which trapped West Asian shipments in the strait. China, hoping to secure discounted spot cargoes from the region, had to reduce its import share from Saudi Arabia’s Ras Tanura terminal (inside the strait) to only 900,000 bpd from Yanbu on the Red Sea. Imports from the UAE also fell because only Murban light crude was loaded from ports outside the strait. In response, China increased imports from Oman (outside the strait) by 230,000 bpd and boosted purchases from Brazil.

At the same time, a 710,000 bpd drop in imports from Russia was mainly due to competition from Indian buyers, who used US sanction waivers to absorb Urals crude. This rearrangement of trade routes limited China’s effective demand, showing that supply security now outweighs price incentives.

Alongside shrinking crude imports, Beijing’s domestic policies further weakened implied oil demand. A ban on gasoline, diesel, and jet fuel exports from March 11 led to a 190,000 bpd drop in product exports. The government raised gasoline prices to contain domestic inflation, but drivers went on a buying strike and switched to lowercost transport options. The result was a surplus of gasoline and diesel in the domestic market, collapsed crack spreads, and sharply lower refining profitability. Thus, real transport fuel demand contracted both through exports and domestic consumption. In the petrochemical sector, the government ordered state companies to prioritise gasoline and diesel production over naphtha, leading to a 20% drop in steam cracker utilisation from February.

Asian oil demand trends are assessed in light of these multilayered developments: the geopolitical disruption in West Asia changed China’s import pattern from regional oil to oceanborne oil (Brazil and Oman); together with selfsanctioning export policies and improper domestic pricing, this suppressed effective crude and product demand simultaneously. This demand weakness, especially in the world’s largest oil importer, confirms the surplus warning for 2026. However, in late April the Chinese government partially backtracked, and it appears that 340,000 bpd of product exports will be approved for May, and refiners will be allowed to use commercial stocks. This adjustment could help drain the domestic surplus, but as long as consumer confidence does not return at high prices and supply risks in the Strait of Hormuz are not resolved, Asian oil demand will remain cautious and downward, continuing downward pressure on global prices.

* Storage situation in Southeast Asia facing the supply shock

Given the ongoing geopolitical tensions in West Asia that have thrown tanker transit through the Strait of Hormuz into uncertainty, the vulnerability of Southeast Asian countries as net energy importers has sharply increased. Reports show that ASEAN’s dependence on crude oil, gas condensates, and oil products from the Persian Gulf is significant, and any sustained disruption of this vital artery endangers fuel supply security. The ASEAN Energy Centre estimates that the oil and gas import bill for the bloc has jumped by $3.36 billion per month due solely to recent tensions — 3.4% above 2026 forecasts — imposing a heavy financial burden on member governments.

The regional mechanism to counter this crisis is the ASEAN Petroleum Security Agreement (APSA), first signed in 1986 and last updated in October 2025 (separating natural gas security from oil). However, APSA has never been activated even once since its inception. Under its provisions, emergency assistance can be requested when a member state faces a shortfall of at least 10% of its normal domestic requirements for 30 consecutive days. Then, other members will try to voluntarily supply 10% of the affected country’s needs on a commercial basis. Unlike the IEA system, which requires members to hold strategic reserves equivalent to 90 days of net imports, APSA has no mandatory storage obligation and allows joint stockpiling only for members “ready and willing.” Moreover, an operational guide for natural gas emergency mechanisms has not yet been developed.

Meanwhile, transparency and preparedness levels are highly uneven. Thailand, with stocks covering 95 days of consumption, is in relatively better shape. The Philippines has announced gasoline (53 days), diesel (54 days), jet fuel (70 days), and kerosene (168 days) stocks, but has refused to provide crude oil storage figures. Indonesia, having diversified import sources including Russian oil, says it has secured crude supply through the end of 2026. Malaysia has only assured through Petronas that fuel supply in the retail network is guaranteed until the end of June, without revealing national storage levels. Singapore and Vietnam have not published any data on their national stockpiles.

This fragmented and opaque picture, together with APSA’s voluntary and nonbinding nature, shows that Southeast Asia is not sufficiently prepared for a longterm supply shock in the Strait of Hormuz. Relying solely on an untested mechanism without guaranteed physical storage cannot protect the region’s highconsumption economies from price spikes and physical shortages. Accelerating national ratification of the updated agreement, creating joint strategic reserves, and increasing storage transparency are urgent and necessary steps to reduce this geopolitical vulnerability.

EF