Strait of Hormuz Closed; World Oil Output Down 12.8M bpd

The International Energy Agency reported that the Strait of Hormuz has been closed since February 2026 amid a conflict involving the United States, Israel and Iran, cutting global oil supply by about 12.8 million barrels per day. A blockade imposed on March 1, 2026, reduced tanker transit through the chokepoint by roughly 80%.

The loss in flows is roughly equivalent to Libya’s pre-war crude output. Exporters that normally ship through the strait face constrained routing options, and refineries dependent on Gulf crude are reporting delivery shortfalls. Draws from strategic petroleum reserves in consuming countries have partially offset the disruption but have not replaced the full volume of lost flows.

Prediction market data for May 2026 show a 57.5% probability that West Texas Intermediate will reach $110 per barrel and a 25.5% probability it will reach $120. The IEA’s supply estimate has been cited alongside those market odds.

The closure followed violent developments tied to the reported assassination of Iran’s Supreme Leader, which escalated hostilities and prompted the blockade. Military activity and diplomatic developments in the region have continued since the blockade began.

Factors that could change supply and pricing include U.S.-Iran negotiations, any new military engagements that might reopen or further restrict the strait, updates from the U.S. Energy Information Administration on supply and demand, and additional releases from strategic petroleum reserves. Insurers and shipping firms are adjusting coverage and routing costs, which affects the economics of rerouting crude cargoes.

Refiners and importers that rely on Gulf crude are experiencing tighter supplies and higher input costs. Global inventories and consumer fuel prices remain sensitive to further escalation or de-escalation in the region, and market participants are monitoring developments that could restore or further constrain flows through the strait.