When US President Donald Trump announced that a deal with Iran had finally been reached to end the war this week, his social media post focused solely on the opening of the Strait of Hormuz to global trade.
For the American president whose country is running out of energy reserves, only one thing really mattered.
“Let the oil flow,” he declared.
After four months of closure, the Strait of Hormuz finally opened to maritime traffic on Monday to the relief of anxious energy markets. Oil and energy prices dropped by over five per cent on the news, with Brent Crude, the global benchmark, falling roughly $4 a barrel to settle at about $83, marking its lowest level in over three months.
But despite the plunge, prices remained roughly $10 per barrel higher than their pre-war levels as energy analysts indicated that physical supply normalisation could take months.
The breathing room in the energy markets, vital for a long recovery, also underestimates the critical breaking point towards which global oil supplies were heading had Hormuz remained inaccessible.
Oil and petrol markets were just weeks away from an inflection point and a major price spike. Oil prices affect petrol prices because crude oil is the raw material used to make petrol for cars. When the cost of crude oil rises, it increases the production costs for refineries, which are then passed on to consumers.
Energy experts projected the end of July as the tipping point in the absence of energy flows from the Gulf. This could have pushed Brent Crude prices to spike to as much as $120 to $130 per barrel this summer.
The importance of this scenario and painful economic outcome was not lost on Trump, only months ahead of the upcoming US mid-term elections.
Iran declared the Strait of Hormuz, which handles about 20 per cent of global oil and liquefied natural gas (LNG), completely closed to all oil tankers and commercial ships in response to the 28 February US-Israeli airstrikes on the country.
Because the US does not import oil from the Gulf, Trump’s initial posturing resisted American intervention to secure the maritime chokepoint, arguing that it was the responsibility of other nations heavily dependent on the route.
The US is the world’s largest oil and petroleum producer and leading global exporter, which, together with the spectre of a deal, served as the buffer between the Hormuz-triggered supply shock that hit other markets and dwindling reserves.
The US ramped up its crude exports to an all-time high of 5.6 million barrels per day in May, a significant surge from the roughly four million barrels per day average seen in recent years.
This kept oil prices below $100 per barrel, despite a brief spike of $120 in early March and late April. But this exacted a heavy price on US oil reserves.
According to a recent CNN report, America’s oil hub in Cushing, Oklahoma, was close to operational stress levels because demand for US oil hit record highs throughout the war faster than drillers could keep up for refills.
It was only weeks away from struggling to supply its customers with the oil they wanted. In normal times, Cushing stores around 40 million barrels of oil with capacity of up to 75 million.
Cushing’s current inventory, according to the US Energy Information Administration (EIA), is 21.6 million barrels. Reserves effectively hit empty once they dwindle below 20 million barrels, because what remains is unusable sludge.
According to CNN, US diesel inventories have fallen to their lowest level since 2003. Petrol stocks were also tightening, sitting at roughly five per cent below year-ago levels. Meanwhile, commercial crude inventories outside Cushing continue to draw down rapidly, dropping by 7.2 million barrels last week alone.
Oil inventories were shrinking fast. The EIA reported that stockpiles in the advanced economies were drawing down by 6.3 million barrels per day, leaving just 2.6 billion barrels in storage, barely 100 million above operational stress levels.
Below a certain threshold, pipelines lose the pressure needed to operate efficiently, and refineries struggle to supply the full range of products customers require. Had this trend continued, the world’s oil market could have entered the danger zone within a month.
Lower demand from China, one of the world’s biggest consumers of energy, has helped ease the supply crunch. By lowering its import demand and drawing from its massive storage reserves, China absorbed a large portion of the initial shock, balancing out the sudden drop in Middle Eastern crude.
The heads of the International Energy Agency, International Monetary Fund (IMF), World Bank and World Trade Organisation (WTO) led warnings about the unprecedented continued rapid depletion of global oil inventories ahead of the peak summer season, saying it presented increasing risks for fuel security.
The US-Iran deal, formalised in a memorandum of understanding, came at the eleventh hour. Yet restoring normal oil flows takes time. Clearing mines from the Strait of Hormuz could take months, while working through a tanker backlog, restarting production, and normalising loadings may take weeks.
* A version of this article appears in print in the 18 June, 2026 edition of Al-Ahram Weekly.
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