Morgan Stanley’s Warns on Prolonged Strait of Hormuz Closure
The oil market is currently facing what Morgan Stanley describes as “a race against time,” as the delicate balance of factors that have so far prevented significant price surges in response to the Iran conflict is increasingly at risk. If the Strait of Hormuz remains closed through June, these stabilizing influences are likely to come under considerable pressure, potentially triggering sharper price increases.
Despite the substantial loss of nearly one billion barrels of oil supply due to the ongoing crisis, futures prices have surprisingly failed to surpass the peaks observed in 2022. This resilience can be attributed to several key factors. According to a detailed analysis by Morgan Stanley’s team, including lead analyst Martijn Rats, the market entered the current turmoil with substantial strategic reserves and supply buffers in place, which have helped absorb the initial shock. Moreover, investor sentiment has been cautiously optimistic, with many market participants holding onto the expectation that the Strait of Hormuz—a critical chokepoint for global oil shipments—would eventually reopen, thereby limiting panic-driven price spikes.
In addition to these factors, the market has benefited from increased crude oil exports from the United States, which have helped to offset some of the supply disruptions caused by the conflict. At the same time, a slowdown in crude oil imports by China, one of the world’s largest consumers, has further eased demand-side pressures. Together, these dynamics have provided a temporary shield for the oil market, preventing a more severe price shock despite the ongoing geopolitical tensions.
