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The 8 April ceasefire announcement and parallel discussions around a 45-day truce have not resolved the Strait of Hormuz disruption. They have, for now, capped the worst-case scenario, but tanker traffic remains at a fraction of normal levels and Iran's demand for transit fees signals a structural shift, not a temporary one.
What began as a regional conflict has become a global energy shock, and the question for markets is no longer whether Hormuz was disrupted, but how permanently the disruption changes the pricing floor for oil.
Key takeaways
- Around 20 million barrels per day (bpd) of oil and petroleum products normally pass through the Strait of Hormuz between Iran and Oman, equal to about one-fifth of global oil consumption and roughly 30% of global seaborne oil trade.
- This is a flow shock, not an inventory problem. Oil markets depend on continuous throughput, not static storage.
- If the disruption persists beyond a few weeks, Brent could shift from a short-term spike to a broader price shock, with stagflation risk.
- Tanker traffic through the strait fell from around 135 ships per day to fewer than 15 at the peak of disruption, a reduction of approximately 85%, with more than 150 vessels anchored, diverted, or delayed.
- A two-week ceasefire was announced on 8 April, with 45-day truce negotiations under way. Iran has separately signalled a demand for transit fees on vessels using the strait, which, if formalised, would represent a permanent geopolitical floor on energy costs.
- Markets have begun rotating away from growth and technology exposure toward energy and defence names, reflecting a view that elevated oil is becoming a structural cost rather than a temporary risk premium.
The world’s most critical oil chokepoint
The Strait of Hormuz handles roughly 20 million barrels per day of oil and petroleum products, equal to about 20% of global oil consumption and around 30% of global seaborne oil trade. With global oil demand near 104 million bpd and spare capacity limited, the market was already tightly balanced before the latest escalation.
The strait is also a critical corridor for liquefied natural gas. Around 290 million cubic metres of LNG transited the route each day on average in 2024, representing roughly 20% of global LNG trade, with Asian markets the main destination.
The International Energy Agency (IEA) has described Hormuz as the world’s most important oil transit chokepoint, noting that even partial interruptions may trigger outsized price moves. Brent crude has moved above US$100 a barrel, reflecting both physical tightness and a rising geopolitical risk premium.
Tankers idle as flows slow
Shipping and insurance data now point to strain in real time. More than 85 large crude carriers are reported to be stranded in the Persian Gulf, while more than 150 vessels have been anchored, diverted or delayed as operators reassess safety and insurance cover. That would leave an estimated 120 million to 150 million barrels of crude sitting idle at sea.
Those volumes represent only six to seven days of normal Hormuz throughput, or a little more than one day of global oil consumption.
Updated shipping and insurance data now confirm more than 150 vessels have been anchored, diverted, or delayed, up from the 85 initially reported. The 1.3 days of global consumption coverage from idle crude remains the binding constraint: this is a flow shock, not a storage problem, and the ceasefire has not yet translated into meaningfully restored throughput.
A market built on flow, not storage
Oil markets function on continuous movement. Refineries, petrochemical plants and global supply chains are calibrated to steady deliveries along predictable sea lanes. When flows through a chokepoint that carries roughly one-fifth of global oil consumption and around 30% of global seaborne oil trade are interrupted, the system can move from equilibrium to deficit within days.
Spare production capacity, largely concentrated within OPEC, is estimated at only 3 million to 5 million bpd. That falls well short of the volumes at risk if Hormuz flows are severely disrupted.
Oil market analysis
How long do idle tankers last?
135M idle barrels — days of cover against each demand benchmark
vs. Strait of Hormuz daily flow (20M bbl/day)
vs. Global oil consumption (104M bbl/day)
vs. US Strategic Petroleum Reserve release (1M bbl/day)
135M
idle barrels on tankers (midpoint of 120–150M range)
~33%
of daily Hormuz flow that is idle storage, not transit
<31 hrs
is all idle storage against global daily consumption
Inflation risks and macro spillovers
The inflationary impact of an oil shock typically arrives in waves. Higher fuel and energy prices may lift headline inflation quickly as petrol, diesel and power costs move higher.
Over time, higher energy costs may pass through freight, food, manufacturing and services. If the disruption persists, the combination of elevated inflation and slower growth could raise the risk of a stagflationary environment and leave central banks facing a difficult trade-off.
No easy offset, a system with little slack
What makes the current episode particularly acute is the lack of slack in the global system.
Global supply and demand near 103 million to 104 million bpd leave little spare cushion when a chokepoint handling nearly 20 million bpd, or about one-fifth of global oil consumption, is compromised. Estimated spare capacity of 3 million to 5 million bpd, mostly within OPEC, would cover only a fraction of the volumes at risk.
Alternative routes, including pipelines that bypass Hormuz and rerouted shipping, can only partly offset lost flows, and usually at higher cost and with longer lead times.
Bottom line
Until transit through the Strait of Hormuz is restored and seen as credibly secure, global oil flows are likely to remain impaired and risk premia elevated. For investors, policymakers and corporate decision-makers, the core question is whether oil can move where it needs to go, every day, without interruption.
US markets took a big hit overnight after a mixed bag of earnings were released from the tech sector. Google’s parent company, Alphabet, took a 9.5 percent hit in yesterday’s session after releasing some disappointing earnings numbers on their cloud computing business. The $1.5+ trillion company has enough weight to pull down the indices with a move like this, and we saw the Nasdaq fall close to 2.5%, and the S&P 500 fall 1.43%.
This sell-off has landed the S&P 500 heavily into a horizontal support zone around 4,170-4,200, so we will be watching to see if this level can hold. If this falls, there is a bit of room to the next level around 4,060-4,080. Over in FX, the Aussie dollar saw plenty of volatility in yesterday’s session off the back of hotter than expected CPI data.
After a temporary spike up to 63.991, price has fallen away aggressively, down over 1.4% since yesterday’s highs. US dollar strength cleared any CPI gains, after markets shifted back into risk-off mode with the disappointing tech earnings and escalating tensions in the middle east. Later today we will have some US GDP data out, plus the ECB is releasing their latest interest rate decision.
Both key data events are worth monitoring for USD or EUR pairs.
The S&P 500 index is currently teetering on the edge, desperately holding onto a crucial support level. This level has proven its resilience with two prior bounces, so traders are keeping a close eye on whether it can endure the pressure once more. After enduring four consecutive red days, there was a sigh of relief overnight as the market managed to post a green day, coinciding with the critical support level.
The broader picture reveals a challenging September for the S&P 500, with a monthly decline so far of 3.78%, following August's 1.77% drop. Lingering concerns of an impending recession, coupled with the Federal Reserve's unwavering commitment to maintaining higher interest rates for an extended period, have been the driving forces behind this recent downturn. Monday's bounce brought some respite, suggesting that investors might be regaining their composure after several days of selloffs.
From a technical standpoint, the current support level is important. Should it fail to hold, the index could potentially see a further decline of 2-3%, targeting the next horizontal support level. Interestingly, there is another layer of support not far below the current horizontal level in the form of a diagonal support line.
This diagonal support line could be something for traders to watch, as it could act as a potential area of activity if the horizontal level falls.
It’s that time again, the looming US FOMC meeting is upon us. Once again, investors and analysts are confident that they know the result. With the rate currently at 5.50%, markets have priced in a hold, with the CME FedWatch Tool giving it a 99.6% probability of the second consecutive hold for the Fed.
Let’s explore that 0.4% chance that a hold might not happen. As you can see from the above chart, there has been a spectacular rise in the Fed Funds Rate since early 2022 when US inflation started to soar. Each Federal Open Market Committee (FOMC) meeting that occurs, the members assess economic conditions, monetary policy and make the big decision on what to do regards interest rates.
The rapid ascent of the Fed Funds Rate has been an attempt to tame the post Covid-19 inflation, with a fair bit more to go. While inflation is easing, recent GDP data in the US signaled a growing economy, which would be a key talking point in the upcoming FOMC meeting. Let’s look at a few scenarios on the markets for this month’s FOMC meeting.
Hold – With inflation easing, and no major data released in the past month to indicate a reversal, markets have priced in a hold at November’s meeting. As this has been widely accepted, this has been priced into the markets, and I’d expect minimal movements in both US equities and the USD if rates are on hold. Cut – With inflation still above the Fed’s target range, a cut is very unlikely.
However, in the slim chance they decide they’ve done enough and are ready to take their foot off the accelerator, we could see plenty of volatility across both the US equity markets and the US Dollar. Signalling that the Fed thinks the worst is over, US equities could rally on the newfound confidence that they’ve made it through the uncertain times, and cost of living may begin to ease. A cut could see USD lose strength, as investors may look to rotate into other higher yield currencies.
I’ll be watching the major USD pairs for plenty of volatility if a cut is seen. Hike - While inflation is easing, there are still signs the economy isn’t ‘breaking’ as much as it should be with such high rates. Recent US GDP data came in above forecasts, which I’m sure is being heavily looked at in the November FOMC meeting.
In the chance the Fed believes further work is needed and hike, I’d expect a short-term sell-off in the US equity markets and a rally in the USD. With the US Dollar Currency Index (DXY) bouncing between a range of around 105-107 for the past month, November’s FOMC meeting might be enough to kick it one direction if we see either a Hike or a Cut. As analysts generally price in the expected decision prior to the announcement, eyes generally shift to the FOMC statement and press conference after the data is released.
The statement and press conference sees Fed Chair Powell discuss the decision and gives an indication on their plans. Analysts will be analysing every word to try and get hints on the Fed’s future movements and will be looking for either more aggressive ‘Hawkish’ language or more cautious ‘Dovish’ language. I’m bracing for volatility across the USD pairs during this speech, and the language used will determine the direction.
Hawkish language can see strength in the dollar, while dovish can see weakness.
The first week of the new quarter has so far been an interesting one, rampant US treasury yields breaking out to 16-year highs, a USD that just keeps going up and now it seems the Japanese Ministry of Finance is directly intervening in currency markets. USD rose to a high of 107.35 on the back of a surge in yields and a hawkish US JOLTS report which showed the US labor markets resilience. Fed member Mester also spoke noting the Fed will likely need to hike rates one more time this year adding to the higher for longer narrative.
The USD did dip later in the session on what seemed to be a Japanese FX intervention, DXY still holding the key 107 level though. JPY was again weak early in the session with USDJPY hitting a high of 150.16, above the “line in the sand” at 150. The weakness dramatically reversed on what could only be a BoJ intervention in the FX market seeing USDJPY sharply move lower 3 big figures in a heartbeat, hitting a low of 147.31.
There has been no official confirmation this was an intervention but with recent jaw boning from Japanese officials threatening just that, it seems obvious it was. USDJPY recovered after the dust settled to reclaim the 149 level, but from my experience this won’t be the last intervention so USDJPY longs should tread with caution from here. AUD underperformed with the Aussie struggling against a strong USD, sour risk sentiment and post RBA where the Aussie Central Bank kept rates on hold and gave nothing extra for the hawks in their statement.
AUDUSD dipped below 0.63 before finding some support around the Nov ’22 lows and retaking the 0.63 support level for now. Today’s economic announcements:
USD traded in a tight range on Tuesday despite a big move higher in treasury yields after a beat in US retail sales figures, the headline rising 0.7% M/M vs 0.3% expected. DXY whipsawing within a contained range, hitting a high of 106.52 on the initial reaction to the retail sales figure, but quickly paring gains to hit a low of 106.02. Fed member Barkin Fed’s also spoke noting that the FOMC will have a good debate when asked about the chance of a Fed hike at heir November meeting.
Looking ahead, Fed speakers are set to continue, ahead of Chair Powell on Thursday, also any further geopolitical updates will be closely watched by USD traders. AUD and NZD were divergent on Tuesday, with the Aussie the G10 outperformer and the Kiwi the laggard. AUDUSD continuing its bounce off the major support at 0.6286 to rally to a high of 0.6380, helped along by what was seen as hawkish RBA minutes released during the session.
NZDUSD on the other hand struggled after a not as hot as expected NZ CPI, NZDUSD dipping to test the October lows at 0.5871 before finding some support.. AUDNZD surged higher, retaking the key 1.07 level and within a whisker of also breaching 1.08 JPY faltered against the USD despite seeing strength early in the session after a Bloomberg report that the BoJ was considering revising their inflation forecasts higher. The surge in the Yen swiftly faded with yield differentials pushing USDJPY higher, to hover just below the 150 “intervention zone” Today’s calendar below:
USD surged higher on Thursday, with DXY having its second biggest daily gain since March, reclaiming the big figure at 106 and holding above its trendline support. Hotter than expected CPI readings with the M/M rising 0.4% (exp. 0.3%) and Y/Y coming in at 3.7%, above the 3.6% consensus got the Dollar rally going, but a dismal US 30yr auction later in the session saw long end yields surging higher, further boosting the Greenback. Cyclical currencies AUD, NZD and GBP were the underperformers, driven lower by a sour risk sentiment and USD strength rather than anything currency specific.
AUDUSD and NZDUSD tumbling to 1-week lows and nearing the bottoms of their recent ranges of 0.6308 and 0.5926, respectively, from earlier peaks near the top of the range of 0.6430 and 0.6025. GBPUSD also tumbled, breaking below 1.2200 amid the aforementioned negative risk sentiment and surging USD. There were some mixed UK macro releases and BoE members highlighting the extent of possible rate hikes to come but this had little effect as GBPUSD fell to a session low of 1.2173 a whisker above Monday’s low of 1.2163.
Gold finished the session down but considering USD strength and surging yields held up admirably as haven flows helped lessen the damage. XAUUSD also finding some support at the 78.6 Fib level at 1866. Today’s calendar is fairly light, Chinese CPI and US consumer sentiment being the highlights.