Global oil inventories are approaching critically low levels at the same time a negotiated reopening of tanker traffic through the Strait of Hormuz has not materialized, industry executives and market analysts said, increasing the risk of a renewed and rapid spike in crude prices that could unsettle broader financial markets and economic activity.
At a Bernstein conference in New York on May 28, Neil Chapman, senior vice president at Exxon Mobil, warned that inventories were at "really, really low levels," and argued that once stocks fall further the market will move rapidly. "You can debate whether that’s going to hit those really low levels in two weeks or three weeks. But once you get to that point, you’ll see prices shoot up," he said, adding that dated Brent, the benchmark used to price more than 60% of globally traded crude, could climb to $150 or $160 a barrel if inventories thin considerably.
Since the conflict that has disrupted flows through the Strait of Hormuz began, crude futures have nevertheless traded below $100 a barrel, aided by releases from strategic reserves and declines in Chinese seaborne crude imports. But those emergency measures and demand shifts have not restored tanker throughput to pre-conflict norms, and analysts caution buffers may soon be exhausted.
Toril Bosoni, head of the International Energy Agency’s oil industry and markets division, said on Tuesday that if stock draws persist at current rates, global inventories could reach critically low points right as summer fuel demand peaks. The risk is that once the cushioning effect provided by stocks and reserves diminishes, prices will have to carry a larger share of the adjustment, putting more of the burden on consumers or resulting in demand destruction.
Mehmet Beceren, vice president and senior market strategist at Rosenberg Research, echoed that concern, noting a potential tipping point by the end of June. "Once we move into the back half of June it is likely that we see oil prices rapidly appreciate" unless throughput through the Strait of Hormuz returns to pre-conflict levels, JPMorgan’s Data Assets and Alpha group predicted in research cited by market participants.
U.S. crude inventories, including the Strategic Petroleum Reserve, fell to 791 million barrels in the week to May 29 according to the Energy Information Administration, the lowest level since February 2024. The United States has drawn down almost 64 million barrels since the start of the conflict and inventories have declined for eight consecutive weeks. In parallel, the U.S. is in the process of releasing 172 million barrels from the SPR, as part of an International Energy Agency-coordinated effort to release a record 400 million barrels to help counter rising prices.
Those release programs, together with a drop in Chinese seaborne crude imports to near a decade low in May, have so far helped blunt some of the immediate supply shock. Still, some traders and analysts say those measures may not be sufficient if the disruption endures.
"I think the risk of a second price shock is real, but the key point is that it may come from the exhaustion of buffers rather than from the initial Hormuz closure itself," said Shohruh Zukhritdinov, a Dubai-based oil trader. JPMorgan analysts also warned that drawdowns in strategic reserves, fuel substitution and other mitigating factors could fall short if the disturbance continues.
Investors and strategists say the conflict has embedded a persistent risk premium into crude markets, with knock-on effects for inflation, bond yields and consumer spending. Joseph Tanious, chief investment strategist at Northern Trust Asset Management, said recent events point to a structural shift that elevates the Strait of Hormuz as a lasting geopolitical chokepoint. He added that a return to pre-war oil prices below $70 a barrel appeared unlikely even if tensions eased.
Tanious highlighted that the impact would not be uniform across regions. Europe and Asia face a greater vulnerability to sustained energy-driven inflation, while the United States, as a net exporter of crude, is relatively better insulated.
From a macroeconomic perspective, higher oil prices act as a drag on growth. Adam Schickling, senior economist at Vanguard, described elevated crude as "a modest headwind" for the U.S. economy, a view informed by domestic oil production and offsetting factors such as strong investment in artificial intelligence that have cushioned consumer spending. Vanguard’s estimates indicate that if crude rose to roughly $120 a barrel and stayed at that level for a year, U.S. economic growth could slow by about 0.4 percentage points.
How households feel the effect depends heavily on duration rather than the precise price level. Fuel consumes a smaller portion of household income than during prior oil shocks, so consumers retain some buffer. But that cushion is finite: if prices remain elevated through the next three months as the summer driving season ramps up, consumer spending could weaken further.
Phil Blancato, chief market strategist at Osaic, pointed to already weak consumer sentiment and warned of a tangible economic impact if oil prices stay at current levels for another three months or move substantially higher in the immediate term. He advised investors to consider portfolio diversification, including assets outside of equities, to manage the associated risks.
Summary
Global crude inventories have declined to alarmingly low levels while tanker traffic through the Strait of Hormuz remains effectively impeded. Strategic reserve releases and lower seaborne imports have mitigated an immediate surge in prices, but analysts and industry executives warn that if stock draws continue into the summer demand peak, a sharp price spike could unfold within weeks and have material consequences for inflation, interest rates and economic growth.
- Key points
- Global inventories and U.S. crude stocks have been drawn down substantially; U.S. inventories including the SPR stood at 791 million barrels in the week to May 29, the lowest since February 2024.
- Industry leaders warn that dated Brent could climb to $150-$160 a barrel if inventories fall further, and some analysts see a tipping point by the end of June.
- Sectors affected include energy, transportation and consumer spending, with potential spillovers to inflation-sensitive assets and bond markets.
- Risks and uncertainties
- Prolonged closure or constrained throughput of the Strait of Hormuz could exhaust inventory buffers, raising the chance of a rapid oil price spike - affecting energy and transportation costs.
- Continued draws on strategic reserves and reductions in seaborne imports may not be sufficient if disruptions persist, creating uncertainty for markets and supply chains.
- Higher and sustained oil prices could slow economic growth and depress consumer spending if elevated through the summer driving season, with knock-on effects on equities and bond yields.
As markets watch inventory trajectories and geopolitical developments, the immediate outlook hinges on whether tanker flows through the Strait of Hormuz can be restored to pre-conflict levels or whether current buffers will continue to be consumed into the peak summer demand period.