So far, the closure of the Strait of Hormuz has not led to a major economic disaster. That won't last forever.

https://prospect.org/2026/06/03/aftermath-something-is-going-to-snap-iran-strait-of-hormuz/





You’re not going to believe this, but it turns out Donald Trump’s latest promise that he was going to get a great deal with Iran to open up the Strait of Hormuz—one of dozens of such promises—has, as ever, come to nothing. A core Iranian demand is that Israel stop carpet-bombing Lebanon, and Israel, with its contemptuous disregard for American interests and human life alike, instead has greatly stepped up bombing and its occupation of Lebanese territory. Iran has therefore cut off contact with American negotiators, and the two sides are once again shooting at each other. Trump, for his part, recently told a CNBC reporter that “I really don’t care. I couldn’t care less” if negotiations are over. They “started to get very boring,” he added. I’ll admit that when this started way back in February, I thought that something big would have broken in the global economy by now. Yet so far, despite some serious pain in certain areas—like global diesel prices—there hasn’t been a truly major crisis. But it’s only a matter of time before one or more of the severely strained parts of the global economy breaks.

Let me start with the factors that have so far helped prevent a major crisis. An important one is the green-energy transition. While very far from complete, it has provided the world with invaluable alternatives for energy and transportation. A great deal of fossil fuel energy can be replaced with solar, wind, and batteries, and a great deal of oil-based transportation can be replaced with electric vehicles—even freight trucking. Chinese exports of solar and EVs are soaring, and even very poor countries are buying in bulk. For a nation like Egypt, whose oil imports have been a crushing burden on a struggling economy, renewable energy is not about hippie-dippie environmentalism, it’s a matter of life and death. Even for many industrial applications, drop-in replacements for fossil energy are widely available. As energy analyst Jan Rosenow writes, “Industrial heat pumps, electric boilers, electro-thermal storage and resistance heating can already replace large shares of low and medium-temperature [fossil fuel–generated] heat. These are not prototypes.”

A second factor is that many nations, particularly in Asia, have cut back their oil consumption through rationing and other controls. Somewhat to my surprise, an ersatz regional coordination bloc has emerged, as nations from Singapore to Japan have ironed out ways to help each other deal with the worst shortages. A third more ominous factor is that the world has been heavily drawing down existing stocks of oil and natural gas. Many people saw the Iran war coming, and filled up every oil tanker and storage facility they possibly could. A great deal of that has since been used up. The vast storage complex at Cushing, Oklahoma (regarded as a storage benchmark), has declined from 33 million barrels to 24.5 million—and they can’t be fully emptied. “You can’t draw them down to zero because there is gunk at the bottom of the tanks,” oil analyst Matt Smith told CNN.

European nations have about 640 million barrels of storage capacity; they are down to perhaps 500 million. The U.S. Strategic Petroleum Reserve had about 415 million barrels before the war; it is down to 357 million, and being drawn down by another nine million per week. The Japanese reserve had about 350 million barrels; it is now down to about 270 million. China is undoubtedly tapping its own vast reserve, which is the largest in the world, but it does not publish official figures. (And what is true of the Cushing tanks is also true of these national reserves; the milkshake, as it were, cannot be fully drunk.) “We’re approaching unheard of inventory levels,” Exxon Senior Vice President Neil Chapman said at a recent conference. “Once you get to that point, then you’ll see price shoot up.”

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