Energy Markets Limit Hormuz Shock. World fuel supply is more diversified than in the past.

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Energy Markets Limit the Hormuz Shock
The world’s supply of fuel is much more diversified than it was during the energy crises of the 1970s.
By Daniel Yergin
June 2, 2026

Before the Gulf crisis, about 70 oil and natural gas tankers traversed the Strait of Hormuz every day. During May, four did. This cessation of normal traffic through the strait has brought to life the nightmare scenario for world energy—Iran seizing control of the maritime choke point. On a net basis, about 15 million barrels a day have disappeared from supply, for a total loss of about 1.2 billion barrels over three months.

As the conflict heads into its fourth month, the oil market is at a juncture. So far prices have been modulated in financial markets by expectations of an imminent settlement and buffered in the physical market by the drawing down of inventories. But inventories are shrinking.
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Today there is much more variety in world oil and natural gas than during the 1970s. The shale revolution has transformed the U.S. from the world’s largest importer of oil to the world’s largest producer of oil and natural gas and largest exporter of liquefied natural gas.
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The U.S. gasoline lines of the 1970s weren’t the result of the crises themselves. Rather they were manufactured by government policies: price controls and clumsy, bureaucratic allocation systems that dispatched gasoline to well-supplied regions and yanked it from regions in short supply.

Today’s crisis has hit Asia hardest, due to its heavy dependence on oil and gas from the Gulf, and leading to shortfalls in supply. In response, governments have resorted to interventions to repress demand, such as rationing, issuing Covid-era like directives to work from home, and giving some domestic consumers priority over others. The U.S. is in a much better position than most other countries. As an energy exporter, America is benefiting from the revenue. The U.S. energy system is functioning efficiently, helping forestall a global economic crisis that could hit hard at home.

If faced with major physical shortages of fuel, governments may have little choice but to intervene more directly in markets. Any intervention should be done with great care. Allowing markets to balance supply and demand, rather than trying to circumvent them, is a basic lesson of energy security. Let’s hope that lesson won’t have to be relearned if the strait isn’t reopened soon.

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