Global Energy Markets Face Severe Supply Squeeze as Conflict Threatens Key Maritime Chokepoints

Global energy markets are approaching a critical friction point as military conflicts across key maritime corridors simultaneously threaten international crude shipments and downstream refined fuel supplies.

While the United States and Iran have temporarily paused direct military engagements in the Persian Gulf to allow for diplomatic discussions—with Iran and Oman holding separate negotiations to keep open the Strait of Hormuz—geopolitical analysts caution that durable stability remains distant. Neither Washington nor neighboring Gulf states are expected to endorse any agreement that cedes control of the strategic maritime transit point to Tehran.

The threat environment expands well beyond the Persian Gulf. In the Red Sea, Iran-backed Houthi rebels continue to target commercial shipping in the Bab el-Mandeb Strait. The narrow waterway serves as a critical bypass for Saudi Arabia to export crude without relying on the Strait of Hormuz. While vessels can bypass the region using the Suez Canal, the canal cannot accommodate the world’s largest crude oil tankers, and market participants harbor concerns that Iranian strikes could eventually extend toward Suez infrastructure.

Helima Croft, head of global commodity strategy at RBC Capital Markets, noted that energy markets are confronting severe structural constraints, describing the operational landscape for Washington policymakers as an escalating crisis across multiple fronts.

Refined petroleum products face significantly tighter market conditions than unrefined crude. According to Rystad Energy research, global commercial and strategic stockpiles held roughly 4.4 billion barrels of crude oil alongside 1.4 billion barrels of refined fuels—such as gasoline, diesel, and jet fuel—at the outset of the Iranian conflict. Subsequent market withdrawals have reduced both categories by approximately 200 million barrels each, leaving refined fuel inventories with critically thin supply buffers.

This inventory imbalance has caused crack spreads—the price differential between unrefined crude and finished fuels—to surge. In the United States, gasoline crack spreads expanded from approximately $8 per barrel at the start of the conflict to between $40 and $50 per barrel, as detailed by Susan Bell, senior vice president of downstream research at Rystad Energy.

Supply constraints are further exacerbated by ongoing Ukrainian drone and missile strikes against Russian energy assets. Ukrainian forces have targeted Russian refineries across the country, as well as tankers transporting Russian oil and fuel through the Black Sea. With severe domestic refining damage curbing output, Russia—historically one of the world’s premier diesel suppliers—has halted diesel exports to protect domestic supply.

Concurrently, Ukrainian forces recently struck an Iranian vessel in the Caspian Sea that was suspected of transporting military hardware between Iran and Russia, illustrating how conflict risks have permeated nearly every major energy transport basin in the region.

These converging supply shocks leave President Donald Trump with minimal policy levers as crude prices hover near $100 per barrel. Emergency crude reserves across major economies are heavily depleted. Enacting a federal gas tax holiday would require legislative approval from a divided Congress, while U.S. oil producers and refiners are already operating near maximum historical capacity. Furthermore, the administration has already invoked a Jones Act waiver to facilitate fuel transport from the U.S. Gulf Coast to supply-constrained East and West Coast markets.

Dan Pickering, founder of Pickering Energy Partners, warned that if the Bab el-Mandeb Strait and the Strait of Hormuz experience de-facto closures, crude oil benchmarks could rapidly return to their late-April peak of $124 per barrel in August.