The U.S. Navy began its blockade of Iran’s ports, with only a few Iran-linked ships able to transit the Strait of Hormuz because they were not heading to Iranian ports. According to the U.S. Central Command, restrictions apply to vessels of all nationalities entering or leaving Iranian ports. Discussion of further talks to end the war dropped benchmark oil prices below $100. As of April 15, Brent crude oil, the international benchmark, is trading around $95 a barrel, and West Texas Intermediate, the U.S. benchmark, is trading at close to $92 a barrel. The average U.S. price of gas is down slightly, at $4.11 a gallon.
Via Reuters, the International Energy Agency (IEA) cut its forecasts for global oil supply and demand growth, with demand expected to fall by 80,000 barrels per day in 2026, from a 640,000 barrels-per-day rise in March, and supply expected to decline by 1.5 million barrels per day. The agency previously predicted supply growth of 1.1 million barrels per day last month and 2.5 million barrels per day at the start of the year. The IEA’s forecasts imply that supply will exceed demand by 410,000 barrels per day in 2026, in contrast to a 2.46 million barrels per day surplus projected in last month’s report. The IEA’s base case expects regular deliveries of oil and gas from the Middle East to resume by mid-year at below pre-conflict levels. Some other forecasts see the conflict with Iran leading to a supply deficit of 750,000 barrels per day on average this year.
According to the New York Times, the central issue of a peace deal is Iran’s nuclear enrichment program. U.S. negotiators over the weekend proposed a 20-year suspension of all nuclear activity, while Iran floated a five-year suspension, which was rejected by the United States. In contrast, the Obama administration’s agreement with Iran in 2015 allowed Iran to gradually enrich more uranium over time until 2030.
As the Wall Street Journal reports, Saudi Arabia is urging the United States to end its blockade, as it fears that the U.S. blockade could lead to attacks on Red Sea oil assets by the Houthis, a militant group in Yemen backed by Iran. Saudi Arabia warned that Iran might retaliate by closing the Bab al-Mandeb Strait — a Red Sea chokepoint crucial for the kingdom’s remaining oil exports via pipelines to the Red Sea. Saudi Arabia has been able to get its oil exports back to their prewar level of around seven million barrels a day by using the East-West pipeline. The Bab al-Mandeb Strait is a narrow passage between Yemen and the Horn of Africa that connects the Red Sea with the Indian Ocean. The strait leads to the Suez Canal and provides transit for ships sailing between Asia and Europe. Before the war in Gaza, 9.3 million barrels of oil and other petroleum products passed through Bab al-Mandeb, which was cut in half after the Houthis began launching attacks on ships around the gateway.
According to Reuters, the International Monetary Fund, World Bank, and IEA urged countries to avoid hoarding energy supplies and imposing export controls that could worsen the tight oil supply situation. IEA chief Fatih Birol indicated that several unnamed countries were holding onto stocks and imposing export restrictions. He appealed to all countries to allow energy stocks to flow into markets. According to Birol, the conflict had damaged more than 80 oil and gas facilities across the Middle East, including refineries, terminals, upstream production, and pipelines. The IEA had already called for the release of 400 million barrels of oil from its reserves, which is 20% of the IEA’s reserves, and was prepared to take further action if additional releases were deemed necessary. Birol claims it could take up to two years to restore Middle Eastern output to its prewar level.
Analysis
With the U.S. instituting a new blockade and the dispute over Iran’s nuclear enrichment at an impasse, energy supply disruptions will continue for at least the immediate future. President Trump told Fox Business host Maria Bartiromo that he expects gasoline prices to remain elevated through Election Day in November. Energy Secretary Chris Wright told an interviewer at the Semafor World Economy Forum that expecting prices to return to sub-$3.00/gallon levels is “an aggressive scenario” amid the U.S. blockade.
However, as Birol warned, it’s important that countries don’t use high prices and less supply as an opportunity to institute export barriers. As we explained regarding U.S. oil exports, “U.S. oil reserves are not a fixed pie to be divided among different constituencies, but a deep pool that will be increasingly drawn from as demand and, subsequently, prices rise. If the consumer base for American oil expands from domestic consumers and businesses to the entire world, that incentivizes American companies to invest greater resources in extraction, creating economies of scale that allow producers to get more out of each oil well.”
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