The headline crude oil price is misleading. The real economic impact is felt through refined products like diesel, which are trading at much higher equivalent prices ($160/barrel equivalent). This indicates the bottleneck is in refining capacity, not just crude supply, directly impacting businesses and consumers.
Focusing solely on the Strait of Hormuz is a mistake. The global oil market is simultaneously strained by three other major disruptions: Houthi control over the Bab el-Mandeb strait, Ukrainian attacks on Russia's CPC terminal, and widespread outages in the global refining system, creating unprecedented systemic fragility.
A massive 1.5 billion barrel supply loss has been absorbed with only a 0.5 billion barrel draw from official inventories. This implies a huge, one-billion-barrel 'unobservable' buffer (e.g., in private storage or China) has kept prices stable, but this hidden cushion is now being exhausted.
The market is testing the price point at which high costs force a reduction in economic activity. For diesel, this 'demand destruction' price is around $1,400 per ton. With current prices nearing that level, there is little room left before trucking and other industrial activities are significantly curtailed, especially in Europe.