Financial markets have decided the oil crisis created by the Hormuz closure is over.
But in reality, oil inventories are near tank bottoms. And last week’s tragic Ras Laffan explosion confirms the restart risks are very real, as we have warned. As Bloomberg report:
“An explosion and fire hit the Barzan local gas supply facility on Sunday, according to operator QatarEnergy. Qatar’s interior ministry said in an online post that 54 people were injured in the blast, and 18 are missing…
“Restarting operations at gas facilities is a complex process that requires carefully balancing pressure to avoid damage and leaks.”
Sadly, at least 13 people are already known to have died, and 66 people were injured. The blast was strong enough to break windows in Doha, 80km (50 miles) away.
And there are at least 100 other Gulf/Asian plants where the same risks will apply as they start-up. Anyone who has worked in the oil and petchem industry will understand the problem:
- The plants are all large, and carry vast quantities of oil and gas at high temperatures
- Any leak, no matter how small, creates a potential risk of a major explosion
- This is why start-ups are normally planned years in advance
- But the Gulf plants all need to restart at once – stretching expert resources to the limit
GULF SHIPPING IS VERY FAR FROM NORMAL
Some ships are now starting to move through the Strait again. But we are nowhere near normal levels as the Lloyds List chart confirms.
And as the new Allianz Safety Shipping 2026 report confirms, there are still many ships stuck in the Gulf. They all need to move before normal rotation can restart:
“As of June 15, 2026, Allianz calculates that around 1,150 cargo-carrying vessels (over 100GT) with a total volume of 29mnGT were operating within Persian Gulf waters, representing an estimated combined vessel and cargo value in the range of US$125bn.”
The risks were emphasised last week, when Iran seemingly fired on a ship not using its “approved” route.
IRAN NOW CONTROLS THE STRAIT OF HORMUZ
The key issue is that the Strait is more open in name, rather than in practice:
- The US has temporarily ended its sanctions on Iranian oil. But Europe still has its sanctions
- So any shipper or insurer doing business with Iran could still be blacklisted in Europe
- The US and Iranians have begun launching retaliatory strikes, as Reuters reports
- And the costs of moving oil and products from the Gulf are rising rapidly, as the Lloyds List chart shows
And who knows what will happen after the MOU expires in 60 days? Iran is currently planning to charge $40bn for “security, safety and environmental services“.
Similarly, as Caixin warns, the status of the Strait has completely changed:
- Passage rights have shifted from free transit to controlled approval
- Routing has changed from free selection among multiple lanes to mandatory designated channels
- Costs have already risen and will further increase if Iran introduces its new charges
- Armed patrols and boarding inspections may become routine
- Coastal-state control has been strengthened at the expense of free passage
In other words, there is no ‘return to normal’.
OECD AND US OIL STOCKS ARE CLOSE TO TANK BOTTOMS
Last week saw inventories at Cushing, the largest commercial crude oil storage hub in the USA, fall to 19mb – below normal operational minimum.
This confirms that oil markets are increasingly running on empty, as the latest EIA chart shows for the USA. As they report:
“Commercial crude oil inventories decreased by 6.1mb to 412.1 mb”.
Globally, onshore oil inventories are already at their lowest seasonal levels on record:
- In Europe, ExxonMobil are about to shut their largest refinery, in Antwerp, due to a strike
- And Russia, one of the world’s top diesel exporters may soon ban exports
- It needs to conserve domestic supplies, as Ukraine continues to attack its refineries
For the moment, prices are falling as refiners have already covered their short-term needs. But this is only temporary.
In reality, the risk of major shortages by Q4 is actually increasing. Oil inventories are near tank bottoms. And Hormuz transits are still only a fraction of the pre-invasion level, whilst tensions are ramping up again.