By George Hay and Yawen Chen
Judging from Brent crude prices, the great 2026 energy shock was merely a fleeting affair. As of Wednesday, oil was trading at $72 a barrel – pretty much where it was when U.S. President Donald Trump first launched strikes against Iran on February 28. But that may not be the best gauge of whether the Strait of Hormuz is back to normal.
The U.S. and Iran’s 60-day ceasefire, signed in mid-June, has certainly prompted a splurge of traffic. Nearly 100 million barrels of previously stuck crude are in the process of being shifted, bringing prices down. In the week to June 28, transits through Hormuz hit 242 vessels across all types of cargo, according to maritime trade publication Lloyd’s List. While much higher than the rate of around 60 per week in the past few months, that is still far below the 700-plus prewar level. Looking specifically at crude oil tanker crossings, the level has jumped to 57, compared with a wartime weekly average of just 15.
This sudden onset of supply has made prices whipsaw in the so-called physical market, which refers to immediate purchases of barrels and is distinct from the more commonly cited futures market. Back in March, some types of UAE crude for immediate delivery traded at a $60 premium over Brent futures contracts because they were harder to source. With stopgap measures like global reserve releases and lower global oil consumption bringing markets into temporary balance, similar metrics have recently traded at a discount.
Yet once the sugar rush has subsided from releasing the 100 million or so of stuck barrels, there is still a risk of global oil markets ending up short on supply, pushing prices up again in future. Separate from the stuck barrels, and potentially more important, is a large amount of "stuck production". This refers to barrels that are not being filled at all, because Gulf countries have feared not being able to sell them. According to Paul Horsnell, chair of the Oxford Institute for Energy Studies, there may be about 9 million daily barrels of potential supply – held by Saudi Arabia, the United Arab Emirates, Iraq and other smaller Gulf countries – currently curtailed in this way. That’s large relative to daily global output of around 100 million barrels. If this production doesn't come back online, it would be a major force pushing crude prices upwards.
Maybe this deficit can disappear in double-quick time. All the affected oil producers – but especially Iraq, Kuwait and Qatar, which have lacked pipeline workarounds in the last four months – are desperate to reopen production that was “shut in” in March, when their storage tanks were full and there were insufficient ships to export their products. Horsnell thinks it’s possible for 80% of the 9 million daily barrel shortfall to return by the end of August.
But as Iraq found when unshuttering production this month and then swiftly curtailing it again when it couldn’t find enough tankers to export its oil, higher output only affects crude prices if ship owners feel sufficiently emboldened to take it through Hormuz. It’s unclear why they should be. Last Thursday, U.S. officials claimed that Iran attacked a cargo ship in the Strait, prompting retaliatory American strikes.
Logically, Hormuz will only properly recover when producers feel confident that they will be able to ship what they produce. This means that the same number of vessels must be prepared to head west through the Strait, to load up on crude, as those travelling east laden with oil ready to deliver. At the moment, there's more evidence for the latter than the former. In the week after June 22, according to Lloyd’s List data, 157 of the 242 non-Iranian transits were heading east. According to Georgios Sakellariou, freight analyst at Signal Maritime, before the war most of the 150 million barrels of shipping crude capacity in the Gulf was empty “ballast” vessels waiting to pick up cargo. Because tankers are reluctant to head west into Hormuz, that has now become less than 100 million barrels, with only a small proportion being ballast ships that are free to load.
If empty ships continue to hang back, producers like Iraq will continue to hold fire on restoring all production. That would leave the 20 million barrels of daily prewar Hormuz flows only partially restored. Combined with rapidly diminishing crude reserves globally and potential increased demand from big oil buyers like China, that would make for a toxic combination. If markets cotton on, prices could spike again.
Not much of this shows up in Brent crude contracts for now. But there’s a better way to gauge Hormuz health. The so-called TD3C Index, which charts the spot market freight rate for shipping crude oil from the Middle East to China, assesses the supply and demand of available shipping, as well as transit security risks. In the wake of the ceasefire, it fell almost 40% to $313,000 per day.
That, however, still leaves it well above the long-run average of materially less than $100,000 a day. In other words, the cost of transporting a barrel of crude through Hormuz is not yet signalling a return to normality. That's one key sign that the 2026 energy crunch may not yet be over.
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CONTEXT NEWS
Brent crude was trading at roughly $72 per barrel as of 0915 GMT on July 1.
That compared with $87 per barrel on June 12, just before the United States and Iran agreed on a preliminary memorandum. The deal established a 60‑day ceasefire to end their four‑month conflict and reopen the Strait of Hormuz while broader talks proceed.