The worldwide news today, 13th April 2026, is the price spike of oil due to the closure of the Strait of Hormuz. It is affecting all countries because it is very inflationary. So why does the price of oil rapidly and devastatingly rise when supply is curtailed by (actually) 8%? Here is the breakdown on that 8% drop in supply and below is the reason for the prices spike.
Firstly, here is the realistic picture of how much oil and gas supply has actually been removed by the Strait of Hormuz shutdown — in percentage terms, and taking into account that some Gulf oil can bypass Hormuz via Saudi Arabia’s pipelines.
1. What normally flows through Hormuz
Before the closure (2025 data):
- ~20 million barrels per day (bpd) of crude + refined products passed through Hormuz — ≈25% of all global seaborne oil trade — ≈20% of total world oil consumption
- ~20% of global LNG trade also passed through Hormuz.
This is the baseline.
2. What has been cut since the closure
The International Energy Agency estimates:
- 8 million bpd of crude removed
- 2 million bpd of condensates/NGLs removed → Total: ~10 million bpd lost from global supply.
That means roughly half of the usual 20 million bpd flow has disappeared.
But that’s not the whole story — because some oil can bypass Hormuz.
3. How much oil can bypass Hormuz via Saudi Arabia?
Saudi Arabia has two key pipelines that move oil westward to the Red Sea, avoiding Hormuz:
- East–West Pipeline (Petroline) Capacity: 5 million bpd (practical throughput often lower)
- Other smaller lines add marginal capacity.
In practice, analysts estimate 2–3 million bpd can be rerouted reliably during a crisis.
This means some, but not most, of the lost Hormuz flow can be offset.
4. So what is the net reduction in percentage terms?
Oil
- Normal Hormuz flow: 20 million bpd
- Lost supply: ~10 million bpd
- Bypass via Saudi pipelines: ~2–3 million bpd
Net global reduction: ≈7–8 million bpd removed from the world market
As a share of global supply (≈100 million bpd):
- 7–8% of global oil supply removed
As a share of Hormuz-dependent supply:
- 35–40% reduction in effective Hormuz‑related oil flows (because some oil is rerouted, but most is not)
LNG
Qatar declared force majeure; ~20% of global LNG supply is effectively offline. There is no meaningful bypass for LNG.
Why the price spike?
The violent spike in oil prices is not an accident, a malfunction, or a sign of market hysteria. It is the market performing its most brutal function: forcing demand down until it matches the new, lower level of supply. When a major disruption removes a chunk of global oil production, the physical world changes instantly. Supply falls from its previous level to a smaller one. But demand does not fall with it. Commuters still need to drive, trucks still need to deliver food, airlines still need to fly scheduled routes, and factories still need to operate. The world continues to behave as if the missing oil still exists.
This mismatch cannot persist. If supply is 92 units and demand is 100, something must give. Because almost all oil use is essential in the short term, demand will not voluntarily shrink. The only mechanism capable of forcing that adjustment quickly is price. As prices rise, the least essential and most marginal uses of oil are squeezed out first: discretionary driving, marginal flights, some industrial activity, some shipping, some petrochemical output. The price keeps rising until enough of these activities stop, and total consumption falls to the new supply level.
The spike is therefore not the problem; it is the solution. It is the rationing system that prevents shortages, queues, hoarding, and black markets. The price rises until the world is using exactly the amount of oil that still exists — no more, no less.
