Updated · Columbia | SIPA Center on Global Energy Policy · Aug 4
Crude Holds in Mid-$80s Despite 10-15 Million-Barrel Hormuz Shock as Refining Margins Near $70
Updated
Updated · Columbia | SIPA Center on Global Energy Policy · Aug 4
Crude Holds in Mid-$80s Despite 10-15 Million-Barrel Hormuz Shock as Refining Margins Near $70
2 articles · Updated · Columbia | SIPA Center on Global Energy Policy · Aug 4
Summary
Five months into the Hormuz disruption, crude has stayed far below feared $150-$200 levels even after 10-15 million barrels a day of supply was knocked out.
China helped absorb the shock by cutting seaborne oil imports roughly 50% from prewar levels, while inventories, bypass pipelines and demand shifts linked to the energy transition softened the hit.
Refining is where the crisis is biting hardest: about 10% of global capacity is down, pushing margins to nearly $70 a barrel and keeping gasoline and diesel prices elevated even if crude falls.
Coal use is heading for another record in 2026 as China leans on coal-to-chemicals and countries prioritize energy security, while renewables and batteries are also reducing gas demand at the margin.
The longer-term lesson is a costlier, more resilient energy system—more pipelines, more LNG projects outside the Middle East, and more spending on supply-chain insurance against future chokepoint shocks.
With crude prices stable despite a historic supply shock, are global markets hiding a looming refined fuel crisis?
Could the unexpected 2026 surge in global coal demand permanently shatter climate goals while saving the energy grid?
The $70 Crack Spread and the 2026 Hormuz Crisis: How the World’s Biggest Oil Shock Reshaped Energy Markets, Inflation, and the Global Transition
Overview
In early 2026, military conflict erupted when the United States and Israel attacked Iran, leading Iran to block the Strait of Hormuz and disrupt a fifth of global oil shipments. This triggered a sharp spike in crude prices, but a massive release from strategic reserves and the use of alternative pipelines by Saudi Arabia and the UAE helped stabilize the market. As non-Middle Eastern producers ramped up output and global demand fell due to high prices, crude prices dropped back to the $80s and then $70s. However, damaged refining capacity and export bans kept fuel prices high, fueling inflation and slowing economic growth, while the crisis accelerated a global shift toward clean, domestic energy sources.