Hormuz: How Much Margin Is Left in the Global Energy System

From Our Previous Articles

In June 2025, we tried to read the tensions in the Persian Gulf beyond the geopolitical headlines, focusing on a structural question: how stable can a global energy system be when a very large share of supply depends on a handful of locations, a limited number of infrastructure assets and a few strategic maritime corridors? The Strait of Hormuz was the clearest example of this vulnerability, because it concentrates a decisive share of global energy flows within an extremely narrow geographical area.

We returned to the subject in March 2026, but in a profoundly changed context. That vulnerability, which only a few months earlier could still be described mainly as a potential risk, had become a concrete operational problem: maritime traffic had collapsed, numerous vessels were stranded in the Gulf, and geopolitical instability had begun to translate into a physical difficulty in moving oil and gas. We titled that article "Strait of Hormuz: When the Global Energy System Comes to a Halt", arguing that a system designed to maximise efficiency, continuity of flows and cost reduction can prove highly vulnerable when a significant share of its capacity depends on a small number of critical nodes.

Several months on, that reading remains valid but needs to be broadened. The global energy system has kept functioning by progressively changing its configuration: inventories built up in previous years have been drawn down, trade routes have shifted, alternative pipelines have been used more intensively, ship-to-ship crude transfers have multiplied, part of demand has fallen, and some infrastructure once regarded as secondary has taken on a central role.

This capacity to adapt has softened the immediate effects of the crisis and prevented even more severe consequences, but it has also progressively used up margins that are not unlimited. After months of continuous stress, it therefore becomes useful to shift attention from the system's ability to withstand the shock to the amount of residual capacity still available and the time needed to rebuild it.

The Scale of Hormuz

To grasp the scale of the problem, it helps to start from a basic figure. In 2025, an average of around 20 million barrels of oil and petroleum products per day passed through the Strait of Hormuz, equivalent to roughly one quarter of global seaborne oil trade. (2)

The barrel is the standard unit used in the oil industry to express volumes of crude and corresponds to approximately 159 litres. In more intuitive terms, 20 million barrels amount to more than three billion litres of oil and petroleum products passing every day through a stretch of water only around 39 kilometres wide at its narrowest point. This concentration of flows explains why Hormuz is regarded as one of the most sensitive passages in the global energy system: a very large share of global supply depends on the uninterrupted operation of a physically limited corridor. (2)

When the conflict that began at the end of February 2026 sharply reduced traffic through the Strait, the system faced a stress test of exceptional size. In an analysis published on 22 June, the IEA estimated that flows through Hormuz had fallen from around 20 million barrels per day before the conflict to an average of approximately 2.7 million barrels per day across March, April and May, while cumulative supply losses from Middle Eastern producers had already exceeded 1.3 billion barrels. (7)

Subsequent monthly reports document a gradual recovery in traffic, but they rely on reference periods and scopes that are not fully comparable. The quarterly figure is therefore used here as a measure of the depth of the shock, while the later reports serve to document the recovery phase. (6) (7)

What emerges clearly, in any case, is the scale of the discontinuity. Part of the volumes was diverted to other infrastructure and routes, while part of production was curtailed. The crisis thus began to show a feature that would become increasingly evident in the following months: the vulnerability was not confined to the maritime passage but progressively involved the entire supply chain.

From the Wellhead to the Market

In 2025, we gave considerable weight to geographical diversification, identifying emerging production hubs such as Guyana, Brazil, Canada and the United States as one of the possible tools for reducing dependence on a few production centres and strategic corridors. That direction remains valid, but the events of 2026 have shown that the availability of the resource is only one of the conditions required for energy to actually reach the market.

Between the field and the end user lies a complex industrial and logistics chain. Oil has to be extracted, stored, transferred to a terminal, loaded onto a vessel or fed into a pipeline, delivered to a compatible refinery, processed into usable products and finally distributed to end markets. Under normal conditions these stages tend to be perceived as a continuous flow; when one of the nodes fails, the interdependence between them becomes much more evident.

This dynamic emerged quickly in March. By 12 March, the IEA estimated that Gulf countries had already cut at least 10 million barrels per day of production, because the sharp slowdown in transits through Hormuz and the progressive filling of storage left less and less room to evacuate new crude. (3)

This is particularly significant because it shows how theoretical production capacity can rapidly lose operational value when there is no way to move the product to market. A field may remain technically capable of producing, but if terminals, pipelines, vessels or storage capacity cannot absorb the volumes produced, upstream operations are also forced to slow down. Security of supply therefore depends on the coordinated functioning of the entire chain.

The Case of Qatar

Qatar added a further layer of complexity, because it showed what happens when the problem directly affects industrial facilities. The country is one of the world's leading producers of liquefied natural gas, commonly referred to as LNG. To be transported by sea, natural gas is cooled to around -162 °C, which greatly reduces its volume and makes it possible to load it onto dedicated cryogenic vessels.

The industrial units in which this process takes place are commonly known as liquefaction trains. The attacks on Ras Laffan seriously damaged two of the fourteen trains then operating in Qatar. According to the IEA, these two units together represented around 12.8 million tonnes per year of LNG production capacity and would take between three and five years to repair. (5)

The figure is useful mainly for distinguishing between the different kinds of failure that can affect the system. A vessel can wait or change route, a pipeline can be repaired and a terminal can gradually resume operations, whereas a large liquefaction facility that has been physically damaged may take years to return to its previous capacity. The crisis has therefore superimposed very different recovery times, making it less and less useful to think of normalisation as a single moment.

The energy network can in fact recover in some parts of the chain while remaining severely impaired in others. This difference in timing matters when assessing the system's ability to rebuild the margin consumed during the emergency.

Drawing Down Inventories

As the crisis continued, inventories took on an increasingly important role. As early as April, the IEA reported that observed global oil stocks had fallen by 85 million barrels in March alone, while crude inventories in the oil-importing countries of Asia had declined by 31 million barrels. At the same time, the blockage of exports had the opposite effect in the Gulf, where crude and products began to accumulate both in onshore storage and aboard vessels. (4)

This apparent contradiction is a good illustration of the nature of the crisis: oil could be abundant in the wrong place and scarce where it was needed. Commercial inventories and strategic reserves therefore allowed importing countries to keep consuming energy that had already been stored while the market looked for new routes and new suppliers.

In this sense, storage serves a temporal function. It allows the system to separate current consumption from current supply for a limited period, creating a window in which routes, contracts and infrastructure can be adapted. That function remains closely tied to the duration of the crisis, however, because every withdrawal reduces the available margin and later creates the need to rebuild it.

By September, this dynamic had become much more evident. The IEA estimated that observed global oil stocks had fallen by around 507 million barrels since the start of the war, while member countries had already released more than 300 million barrels of emergency reserves onto the market. The two figures refer to different statistical scopes and should not simply be added together, but both document how intensively stocks have been used to keep the market in balance. (11)

The Decline in Demand

The response to the crisis also came from the consumption side. In the second quarter of 2026, according to the IEA, global oil demand fell by around 5.3 million barrels per day year on year, the first quarterly decline since the pandemic. Diesel accounted for around 1.2 million barrels per day of the reduction, while naphtha, LPG and ethane together recorded a fall of approximately 1.8 million barrels per day. (11)

This phenomenon is often called demand destruction and describes a contraction in consumption caused by high prices, product shortages or supply difficulties. In practice it can take the form of lower industrial activity, reduced petrochemical output, lower transport consumption or changes in the behaviour of companies and consumers.

This component matters for interpreting the stabilisation of the market correctly. Part of the balance was achieved by increasing or reallocating supply, while another part reflects an economy that consumed less energy. Demand has therefore also acted as a shock absorber, although with economic consequences that need to be considered separately from the physical ability of the system to produce and distribute energy.

Bypass Infrastructure

Another key response was the more intensive use of the infrastructure that makes it possible to bypass Hormuz. Saudi Arabia operates the East-West Pipeline, a major pipeline running across the country to the Red Sea which, according to the U.S. Energy Information Administration, has a capacity of around 5 million barrels per day, temporarily expandable to approximately 7 million. (1)

The United Arab Emirates, for its part, has connections to Fujairah on the Indian Ocean, which allow part of its exports to reach open water without passing through the Strait. These assets proved decisive because they kept moving volumes that would otherwise have remained blocked. (2)

Alternative capacity, however, also has precise physical limits. In April, the IEA estimated that exports through the main bypass routes, including the Saudi and Emirati routes and the Iraq-Turkey pipeline, had risen to around 7.2 million barrels per day, compared with less than 4 million before the war. Pre-crisis flows through Hormuz, by comparison, exceeded 20 million barrels per day. (4)

Redundancy therefore worked, but its intensive use has progressively turned what was originally alternative capacity into an indispensable component of the operating system.

A Network of Chokepoints

Over the following months another limit became apparent. Moving Saudi crude to the Yanbu terminal on the Red Sea makes it possible to avoid Hormuz, but many routes from Yanbu to Asia in turn depend on the security of the Red Sea and Bab el-Mandeb. When this area also became more unstable, part of the flows had to be reallocated again, through Egyptian infrastructure or along longer routes.

The result is a network in which the solution to one constraint can increase dependence on another node. A cargo can continue to reach the market, but it may require more sailing days, more tankers, more capacity at intermediate terminals and higher insurance and logistics costs.

This does not diminish the usefulness of bypass infrastructure; on the contrary, it confirms its importance. It does show, however, that redundancy has to be assessed along the entire route and not only at the point where it is introduced. An alternative pipeline is truly useful only to the extent that the infrastructure and routes downstream also remain available.

Tanker Capacity

Longer routes have progressively made tanker availability a critical factor as well. A vessel that takes longer to complete the same delivery remains occupied for longer and therefore reduces the number of voyages it can make in a year, so that, for the same volume to be transported, more vessels are needed.

The crisis has also seen an increase in ship-to-ship operations, that is, transfers of crude from one vessel to another at sea. These operations make it possible, for example, to use one vessel to cross an exposed area and a second to complete the voyage to the final market.

By late September, Reuters reported that the areas used for transfers in the Gulf of Oman were approaching their capacity limits. After the disruption of Saudi Arabia's East-West Pipeline, more than 60 million barrels of Saudi crude had been earmarked for transfer operations near Oman, and the increase in exports required between 36 and 40 additional VLCCs, the very large crude carriers used for intercontinental transport. At that stage some charters had reached around $1.27 million per day. (13)

These are exceptional values tied to a specific phase, but they clearly illustrate how logistics can become a constraint independent of the quantity of crude available. The ability to deliver energy also depends on the number of usable vessels, the time needed to complete each voyage and the availability of sites and infrastructure where intermediate operations can be carried out.

Refining and Petroleum Products

The crisis has also gradually brought the role of refining into focus. The end consumer does not use crude oil but petrol, diesel, aviation fuel, LPG and numerous products destined for industry and petrochemicals, so the availability of crude is only one of the steps required to guarantee actual supply.

In September, the IEA reported that global refinery throughput had reached around 81.4 million barrels per day in August, still 4.2 million barrels per day below the same month of 2025. In the same period, refining margins in the Atlantic Basin had reached record levels, with particularly strong pressure on diesel. (9) The U.S. Energy Information Administration also expected U.S. distillate inventories, a category consisting mainly of diesel, to fall below 100 million barrels and to remain below their five-year low in the following months. (8)

These data help explain why the price of Brent, although it remains a fundamental benchmark for the oil market, describes only part of the problem. The actual cost of supply also depends on refining, vessel availability, insurance, routes, storage and the availability of individual end products. As the crisis developed, pressure therefore shifted progressively from the headline price of crude to the overall cost of keeping the chain running.

The Rigidity of LNG

Liquefied natural gas makes this dynamic even more evident. Moving LNG requires liquefaction plants, dedicated cryogenic vessels and compatible regasification terminals, which creates a logistics chain that is less flexible than the one used for crude oil.

In September, Reuters reported that Qatari LNG exports had fallen by around 96% compared with the equivalent period of the previous year, with only 18 cargoes delivered by August against 509. The figure refers to a specific phase of the crisis and does not necessarily describe a permanent condition, but it conveys the scale of the disruption affecting one of the world's leading exporters. (14)

Buyers responded by looking for alternative supplies in North America, Australia, Indonesia, West Africa and other regions. This reallocation confirms the importance of geographical diversification, but it also highlights the time needed to turn a potential new source into capacity that is actually available.

A pipeline, an LNG terminal, a refinery or a new production project normally takes years of design, permitting and construction, whereas a geopolitical crisis can alter flows within days. This mismatch between the speed of the shock and the speed of infrastructure adaptation has become one of the most significant features of the crisis.

Partial Normalisation

During the summer, some indicators showed signs of recovery. In its June report, for example, the IEA recorded a significant recovery in flows through Hormuz and stressed that full reactivation would nonetheless take time to normalise the supply chain. (6)

This phase showed that the physical reopening of a route is only one step in the recovery process. Shipowners and insurers have to reassess risk, vessels have to be repositioned, terminals have to clear any congestion and plants have to return to their previous capacity. At the same time, the inventories used during the most critical phase have to be rebuilt.

Prices, too, can recover faster than the physical network. Markets tend to price in expectations about the future, whereas plants, inventories and logistics flows respond to operating constraints that take longer to change. A fall in prices can therefore coexist with an industrial situation that is still very far from the pre-crisis configuration.

The Residual Margin of the Global Energy System

At this point, the sequence of the previous months can be read more clearly. Inventories, alternative pipelines, new suppliers, refining capacity, lower demand and logistics flexibility allowed the system to keep operating through an extremely severe shock. At the same time, each of these mechanisms drew on a finite resource: stocks, available capacity, tankers, storage space, operating margin or demand that could still be compressed.

The disruption of Saudi Arabia's East-West Pipeline in September is a particularly significant example. Infrastructure used to reduce dependence on Hormuz had in the meantime become so important that it turned into a critical node itself; its temporary unavailability pushed part of the flows back towards the Strait and increased reliance on ship-to-ship transfers. (11) (13)

Resilience therefore takes on a more concrete dimension when it is considered as the residual capacity available within the system. This capacity includes inventories, alternative infrastructure, transport availability, refining capacity, demand flexibility and the possibility of securing alternative supplies. The crisis has shown that all of these elements contribute to the continuity of the system and that their prolonged use progressively reduces the margin they provide.

Europe and Gas Storage

The European situation illustrates this point particularly well. According to Gas Infrastructure Europe, EU gas storage was around 71.3% full as of 29 September, with significant differences between countries: Italy was close to 87%, Germany stood at 57.7% and the Netherlands at 58.2%. (16)

These levels are an important component of European energy security, but their significance is essentially one of time. Storage makes it possible to bridge, for a period, the gap between demand and new supply, whereas drawing it down creates the subsequent need to refill it. Storage levels should therefore be read together with the system's ability to keep receiving new flows. International competition for LNG available outside the Gulf is particularly relevant for this reason, since Europe and Asia increasingly depend on their ability to attract alternative cargoes while Qatari supply remains severely impaired.

The Case of Italy

The Italian case offers a concrete example of the distance between managing the immediate effects of a shock and resolving its structural causes.

At the end of September, Eni introduced a temporary cap across the Enilive network of €1.99 per litre for petrol and €2.19 per litre for diesel, initially for thirty days. The company explicitly linked the measure to the contraction in international supply of refined products, the scarcity of European refining capacity and the excise-duty reductions already in force. (12)

SOCAR, through Italiana Petroli, subsequently aligned itself with the same levels, while Q8 in turn announced its own price-containment measure. (15) (17) At the same time, the Italian government intervened directly on excise duties: the decree-law of 17 September temporarily set the excise duty on diesel at €572.90 per 1,000 litres from 18 to 25 September and at €622.90 per 1,000 litres from 26 September to 5 October. (10)

These measures can limit, in the short term, the transmission of the shock to consumers and businesses and therefore play a practical role in managing the emergency. Their reach, however, remains tied to the final stretch of the chain: they affect the price paid by consumers and the distribution of the economic cost, whereas production, availability of refined products, maritime transport, refining capacity, storage and route security depend on dynamics that go well beyond the national scale.

This also makes it possible to define more precisely the role of a single government. National authorities can act on taxation, consumer protection, domestic production capacity and relations with operators, whereas a crisis originating in the global structure of supply inevitably requires responses involving several countries, producers, companies, infrastructure systems and commercial agreements. The very fact that price-containment measures became necessary indicates that the effects of the shock have reached the last links in the chain while normalisation upstream remains incomplete.

What We Have Learned

Looking back at the articles of 2025 and March 2026, several conclusions are confirmed. The concentration of such a large share of global flows in a few corridors represents a genuine vulnerability; alternative pipelines do not have the capacity needed to fully replace Hormuz; geographical diversification remains one of the main tools for improving security of supply; and a highly efficient system can have insufficient redundancy when subjected to a prolonged shock.

Later events, however, have broadened this reading. The duration of the crisis has carried more weight than we initially considered, because even effective solutions can progressively lose capacity when used for months. Logistics has proved as important as production, refining has taken on an independent role in the availability of end products, and LNG has shown a very different degree of flexibility from crude oil.

Compared with the initial reading, what changes is therefore the object of the resilience assessment: beyond the amount of alternative production available, it becomes necessary to consider resilience as a property of the entire chain, from the resource to its actual delivery. The European and Italian cases make this evolution particularly visible, because they show how the effects of a crisis originating at a distant node can propagate all the way to storage, end-user prices and emergency measures taken at national level.

After the Reopening

The prospect of a full reopening of Hormuz finally raises an important question: how much of the previous configuration can actually be recovered?

From a physical standpoint, greater security in the Strait would allow vessels to return progressively to their usual routes, reduce pressure on the bypasses and could help normalise insurance costs and freight rates. However, several effects accumulated in the preceding months would take different amounts of time to be absorbed.

Strategic and commercial inventories have to be rebuilt, damaged infrastructure has to be repaired, vessels have to be repositioned, and some of the new contracts and trade routes may remain active even after conditions stabilise. Governments, importers, insurers and operators have also acquired much more concrete information about the level of risk associated with the concentration of flows.

For this reason, the return of traffic does not necessarily coincide with an immediate recovery of the same amount of margin the system had before the crisis. Flows can normalise faster than the system's overall capacity to respond.

The Time Factor

After months of tension, duration emerges as one of the elements that best connects all the phenomena observed. Inventories can sustain consumption only for limited periods; alternative routes have defined capacities; longer voyages reduce the effective availability of vessels; lower demand can temporarily rebalance the market but carries economic consequences; and damaged facilities may take years to recover fully.

The global energy system has shown a significant capacity to adapt. Production has been reallocated, flows have been shifted, alternative pipelines have absorbed larger volumes, inventories have been drawn down and the refining system has rapidly changed its sources of supply. This response has made it possible to contain the effects of an exceptional shock, while the data collected in recent months also show how intensively the available tools have been used.

Energy security can therefore be read as the ability to maintain supply over time through a combination of production, transport, processing, storage and alternatives that can actually be used. The resilience of the system depends on its ability to absorb a crisis while retaining enough operating margin to manage any further discontinuities.

After six months of sustained pressure, the key issue is no longer simply how much residual margin remains, but how much of that margin is still usable and how long it will take to rebuild it. The Hormuz crisis has shown that the system can continue to operate even through a severe shock, but only by progressively drawing on inventories, logistics capacity, alternative infrastructure, demand flexibility and industrial headroom.

If time has become one of the most critical variables, the next question is unavoidable: how long can this configuration be sustained before the system loses a significant share of its ability to absorb further disruption?

Even if the Strait of Hormuz were to return to full normality, a second question would remain. The resumption of traffic would clearly be a crucial step, but how quickly could inventories be rebuilt, infrastructure restored, vessels repositioned, logistics chains rebalanced and the operating margin consumed over these months recovered? A corridor can reopen faster than the system as a whole can regain enough headroom to operate with confidence.

At this stage, turning these questions into a reliable forecast would be difficult. Only time will tell how quickly the system can recover and what configuration will emerge after the crisis, because the scale, duration and interdependence of the constraints affecting global energy supply leave us with very few genuinely comparable precedents.

Sources Cited in the Article:

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• (2) International Energy Agency. (2026, February). "Oil security and emergency response – Strait of Hormuz."

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• (4) International Energy Agency. (2026, 14 April). "Oil Market Report – April 2026."

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• (10) Gazzetta Ufficiale della Repubblica Italiana. (2026, 17 September). "Decreto-legge 17 settembre 2026, n. 162 – Disposizioni urgenti per il sostegno economico e il contenimento degli effetti derivanti dal perdurante aumento del costo dei carburanti, nonché in materia fiscale."

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• (12) Eni. (2026, 25 September). "Eni per l'Italia: dal 28 settembre tetto ai prezzi di gasolio e benzina per 30 giorni, con possibile estensione fino a fine anno."

• (13) Reuters. (2026, 25 September). "Gulf of Oman ship-to-ship oil transfers reach limit as Saudi exports surge."

• (14) Reuters. (2026, 28 September). "Qatar extends force majeure notices on LNG supply to Edison, some Asian clients."

• (15) Reuters. (2026, 28 September). "SOCAR matches Eni's fuel price cap, helping Italy tame costs."

• (16) Gas Infrastructure Europe. (2026, data as of 29 September). "Gas storage levels."

• (17) Reuters. (2026, 29 September). "Oil giants rush to help Italy's Meloni curb energy costs with fuel price caps."