The lethality of a second blockade of Hormuz might be even greater?

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Since mid-July 2026, the US-Iran conflict has escalated again, with the Strait of Hormuz experiencing a second blockade and Brent crude prices quickly approaching the $100/barrel mark. Huatai Securities believes that, unlike the first blockade from March to May this year, the global energy market's "buffer" has been exhausted, and this round of impact may surpass the previous one.

Huatai Securities pointed out in its July 24 research report that with the US Strategic Petroleum Reserve (SPR) falling to its lowest level since 1983, attacks on the Red Sea and Oman Bay alternative routes, and the Russian-Ukrainian conflict causing substantial destruction to Russian refineries, the current static crude oil supply gap has soared to 5.5–6 million barrels per day (accounting for 5–6% of global demand).

More severe is that the crisis is quickly spilling over from crude oil to refined products (diesel/jet fuel), key industrial gases (helium), as well as agricultural products (fertilizers).

Why was the impact of the previous blockade less than expected? Three major buffer mechanisms worked together

To understand the severity of the current situation, we first need to review why oil prices were relatively contained during the first blockade.

After the outbreak of the US-Iran conflict at the end of February 2026, the Strait of Hormuz’s transit volume plummeted, reaching only 1.1 million barrels per day by May (about 7% of pre-conflict levels). However, oil prices did not spiral out of control because three layers of buffers were simultaneously effective:

First, large-scale substitution supplies filled the gap.

Saudi Arabia and the UAE rerouted certain crude shipments through the Red Sea, with average volumes of about 4.5–5 million barrels per day from March to May; oil exports from the Atlantic Basin (US, Brazil, Canada, Kazakhstan, Venezuela) increased by about 3.5 million barrels per day as of February; the Oman Bay's transshipment volume rose to 1.4–1.5 million barrels per day in June. Combined, these three channels boosted Gulf and external supply by about 9–9.5 million barrels per day, covering about 60% of the Strait's supply gap.

Second, stock releases provided a safety net.

Since the IEA member states announced strategic reserve releases on March 11, up to July 21, 290 million barrels of oil have been released to the market, accounting for about 70% of the strategic release plan. This stock release offset about 3 million barrels per day. Coupled with the expectation management of "soon reopening the strait," micro players tended to consume inventory rather than hoard oil, creating a considerable buffer.

Third, demand-side elasticity created a natural shock absorber.

China’s gasoline consumption in June dropped 9.4% year-on-year, and estimates suggest the substitution effect of new energy vehicles can reduce global gasoline demand by about 300,000 barrels per day; Europe’s new energy vehicle sales growth rate remained at a high area of 31% from January to May, with power substitution of transportation energy becoming increasingly apparent. Accelerated energy transition has made demand-side elasticity far more ample than in any previous crisis.

Second blockade: All three buffers weakened, supply vulnerability surges

However, after July 8, in the second round of blockade, Huatai Securities believes that the above three-layer buffer system has experienced systemic weakening.

1. Stock buffer significantly depleted.

By mid-July, US Strategic Petroleum Reserve (SPR) fell to about 311 million barrels, a cumulative decrease of about 104 million barrels since the conflict began, marking the lowest since 1983. The US Department of Energy indicated that it may shift from releasing stocks to replenishing them over the next year.

According to the original plan, the remaining releaseable scale is about 60–70 million barrels, corresponding to a daily release capability of about 1 million barrels per day. As the plan draws to an end, this marginal buffer will weaken significantly. Meanwhile, OECD commercial stocks are rapidly declining, and Japanese & Southeast Asian inventories are also at historical lows.

2. Alternative supply routes are blocked.

According to CCTV News, the Houthis announced a maritime blockade of Saudi Arabia on July 20. On July 23, an oil tanker was hit by a projectile in the Red Sea area close to Saudi waters; Iran strengthened control near Oman, and the UAE’s previous transshipment via Oman (1.4 million barrels/day) has dropped sharply.

Oman Maritime Security Center reported on July 14 that three oil tankers were attacked near Oman, resulting in three missing crew and six wounded. In June, the combined transportation volume in the Red Sea and Oman Bay increased by close to 5 million barrels per day compared to pre-conflict figures, but this buffer is now rapidly eroding.

3. Non-Gulf nation supply growth slows, and the Russia-Ukraine energy escalation worsens matters.

Russia’s June crude output was about 8.9 million barrels per day, about 900,000 barrels below its OPEC+ implied target. Ukraine’s continued attacks with long-range drones have struck more than 16 major refineries, affecting over 30% of Russia’s refining capacity, about 2 million barrels per day. US crude exports in mid-July have fallen to about 3.8–4 million barrels per day, down about 500,000–700,000 barrels per day from May highs.

Considering these factors, Huatai Securities estimates that from July 8 to 20, the Strait’s transit volume, combined with the Red Sea, Oman, and non-Gulf country supply increases, has dropped from about 80% counterbalance in June to about 60%, with the static supply gap ballooning to 5.5–6 million barrels per day.

Crisis spillover: refined products, helium, and agricultural products face supply risk

The destructive power of this crisis not only stays on the surface of crude oil but is also spreading downstream and across industries, generating multipoint shortage crises.

Refined oil products (diesel/jet fuel) face extreme shortages: Middle East attacks and logistics disruptions have cut about 3 million barrels per day of capacity, plus Russia’s actual decline of 1.5–2 million barrels per day, resulting in a global loss of about 5 million barrels per day of refining capacity (5% of total global capacity). Russia has fully banned diesel exports; diesel prices in Europe, the US, and Asia are surging simultaneously. Meanwhile, US gasoline stocks have fallen below the past 5 years’ seasonal lows, raising the risk of a retaliatory stockpiling surge during peak season.

Key raw materials (helium) supply chain emergency: Helium is irreplaceable in semiconductor manufacturing and medical sectors. Global helium supply relies heavily on the US (44%), Qatar (34%), and Russia (10%). The Middle East conflict has disrupted Qatar’s output, and Western sanctions have constrained Russian helium, causing extreme tightness in the global supply chain.

Agricultural product inflation risks surge: Fertilizer is a direct victim of the energy crisis. Since February, urea prices have soared about 55%, hitting the highest level since October 2022. Russia has halted fertilizer exports (affecting 25% of global ammonium nitrate supply). With the northern hemisphere’s planting season approaching, the risks of crop output reduction and price surges are intensifying.

Meanwhile, Huatai Securities believes that the prolonged US-Iran “tug-of-war” is thoroughly worsening the balance between global growth and inflation.

“Quasi-stagflation” severely hits macro fundamentals: Since the outbreak, Brent crude oil’s average price has risen about 41.8% year-on-year. The IMF has sharply raised its 2026 global inflation forecast by 1 percentage point to 4.7%, and lowered global economic growth forecast to 3.0%.

Asia’s emerging markets face a “double whammy”: Asian economies highly dependent on energy imports are experiencing a double blow from rising international oil prices and local currency depreciation. Since the conflict, the yen (-4.5%), won (-3.4%), and Indian rupee (-6.1%) have all depreciated, and imported inflation pressures are surging.

Risk disclaimerThe market has risks; investments require caution. This article does not constitute personalized investment advice, nor does it take into account individual users’ specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at your own risk. ```