The Iran war and subsequent closure of the Strait of Hormuz – a key waterway through which about 20% of global oil trade passed before the conflict – has jolted oil supplies on a scale unprecedented in decades.
The crisis has sent countries around the world looking for alternatives to replenish lost supplies.
Many governments, particularly in Asian countries that rely heavily on Middle Eastern energy, have also introduced measures to curb fuel demand.
The International Energy Agency (IEA) in March coordinated the release of massive oil reserves – about 400 million barrels – from industrialized countries’ emergency reserves. The move was aimed at ensuring adequate supply and stabilizing crude oil prices.
Strategic reserves provide protection against oil shocks
Before the war, global crude oil markets were in surplus. Major economies built up huge strategic reserves, with the largest reserves globally held by China, the United States, and Japan.
As of December 2025, China’s reserves stood at about 1.4 billion barrels, including both commercial and government reserves, According to data from the US Energy Information Administration (EIA).
The US maintained approximately 413 million barrels of commercial crude oil in its Strategic Petroleum Reserve and an additional 411 million barrels of commercial crude oil.
With about 263 million barrels in government-controlled reserves alone, Japan has the third largest strategic oil reserves.
Meanwhile, EU countries are required by law to maintain emergency stocks At least equivalent to 90 days of net imports or 61 days of consumption.
The bloc contributed about 20% to the nations of the 400 million barrels released as part of the IEA-coordinated move. Germany released 19.5 million barrels, followed by France (14.6), Spain (11.6) and Italy (10).
According to US EIA, India has about 21 million barrels in its strategic reserves.
They currently offer Coverage of about 9.5 days of net oil imports, according to S&P Global.
But taking into account the reserves held by state-owned oil companies, the coverage increases to about 74 days.
Apart from these strategic reserves, millions of barrels of Russian crude oil lying on stranded oil tankers also became available to buyers in Asia after the US temporarily waived sanctions on this oil to boost global supplies.
When will oil reserves reach critical lows?
These oil reserves have so far helped absorb energy shocks and manage supply volatility.
But nearly three months after the war broke out, oil traffic through Hormuz remains halted despite hopes that Washington and Tehran are moving toward a deal to end the conflict and reopen the vital waterway.
As the disruption continues, countries have continued to draw down both strategic reserves and commercial inventories at a rapid pace.
IEA said a decline was seen in oil reserves globallyRecord pace in March and April, a decline of 246 million barrels.
Agency head Fatih Birol recently warned that oil reserves are “not endless” and are falling “very rapidly” around the world. He also stressed that it would take “a lot of time” for production and refining capacity to return to pre-war levels.
US investment bank Goldman Sachs issued a similar warning last week, saying global oil reserves were declining at a record pace this month.
“At the current pace of decline, commercial oil stocks could reach critically low levels by the end of June,” Neil Shearing, chief economist at Capital Economics, wrote in a research note on May 18.
If the supply situation does not improve soon, “prices could rise rapidly,” Shearing warned.
What impact will the decline have on prices?
The situation has raised fears of shortages, especially during peak summer demand.
If supply disruptions continue, “the shortfall will not be felt as acutely across all geographies and regions,” Antoine Half, an energy expert and non-resident fellow at Columbia University’s Center on Global Energy Policy, told DW.
He said Asian countries are likely to be most affected due to their heavy reliance on Middle Eastern energy, while air travel and aviation fuel are among the sectors and product categories most affected.
It would also send oil prices higher, the impact of which “will be felt everywhere, including in countries that benefit from ample domestic supplies like the US,” Half said.
Crude oil prices already remain high compared to pre-conflict levels, reflecting supply constraints and geopolitical risk premiums.
At the same time, prices have been volatile and sensitive to headlines, falling after statements indicating a quick resolution of the conflict and rising when there are indications that the strait will remain closed for a longer period of time.
Helima Croft, head of global commodity strategy and MENA research at RBC Capital Markets, believes the market is underestimating the challenges involved in resolving the conflict.
“The fundamental reality is that in the near term, expectations for full Hormuz recovery rest on unrealistic assumptions about the ease of resolution and the strategic calculations of all parties involved,” he wrote in a report.
If the current rate of supply losses continues, the expert estimates, “the cumulative crude oil deficit will exceed 1 billion barrels by the end of the month and reach 1.5 billion barrels if the situation remains unchanged through June.”
This would push oil prices to their highest level since 2008, he said. “At that level, a reduction in demand will probably balance the market.”
Some countries have already introduced measures to curb and conserve fuel demand, such as reducing the work week in the Philippines and reducing transportation use in places such as Pakistan.
Another coordinated release of strategic oil reserves?
However, amid declining reserves, governments appear wary of a second coordinated release of strategic reserves.
French Finance Minister Roland Lescure, who recently hosted his counterparts from the G7 countries, told financial Times That stocks are “limited” and cannot be released “without visibility on the duration and intensity of the conflict at this stage”.
Half said that if Hormuz remains blocked for a long time, “there would be little that multiple governments can do at the same time to ensure supply and keep prices under control.”
“Releasing oil from strategic reserves could help, but only to a certain extent, as the supply is not unlimited,” he said.
Edited by: Rob Mudge