The market impact from the expected, but unrealized, loss of 3 million barrels/day from Russia was immense. The current Strait of Hormuz disruption is four to five times larger at 14 million barrels/day. This scale of shortage is historically unprecedented, meaning past events are poor guides for predicting market outcomes.
Price formation in oil occurs in the seaborne trade, not the total consumption market which includes landlocked pipelines. A disruption impacting a third of the seaborne market is therefore far more catastrophic than its 20% share of total global consumption would suggest, as landlocked supply cannot alleviate shortages elsewhere.
A scenario where the Strait of Hormuz reopens but remains under Iranian control is not a return to normal. This would fundamentally alter the market by making 20% of global supply less reliable, effectively trapping OPEC's spare capacity, and introducing a permanent risk premium into oil prices.
Despite being a net oil exporter by volume, the U.S. is not isolated from global price shocks. Its market is deeply integrated through massive flows of both imports and exports. In the global seaborne market, there is effectively one oil price that all participants, including the U.S., must pay.
While headline Brent crude reacts slowly to a supply shock, prices for physically delivered products like jet and bunker fuel in key regions skyrocket. These niche prices are the true leading indicators of underlying market stress and physical shortages, offering a more accurate view than commonly cited futures prices.