MW How the U.S. blockade of Iranian ports could further erode oil inventories
By Isabel Wang
Global oil inventories have dropped below their six-year average: Société Générale
Global oil inventories have dropped below their six-year average.
The U.S. blockade of Iranian ports could accelerate the drawdown in global oil inventories, further tightening near-term supply and pushing back hopes of market normalization into mid-May, according to Société Générale.
Global crude inventories have already fallen by around 190 million barrels over the past six weeks to just below 8 billion barrels. A full U.S. military blockade of Iranian ports, which officially took effect at 10 a.m. Eastern time on Monday, would further accelerate inventory draws by another 1.7 million barrels per day, according to a team of strategists at Société Générale led by Mike Haigh, head of fixed-income and commodities research (see chart below).
SOURCE: SG CROSS ASSET RESEARCH/COMMODITIES, IEA, KPLER, DOE
Lower oil inventories typically mean there is less of a buffer in the energy market to absorb supply disruptions, such as those caused by the escalating U.S.-Iran conflict. This would also make crude-oil prices more sensitive to geopolitical shocks and could eventually see them bleed through into higher prices for gasoline, diesel and jet fuel, weighing on consumers and the broader economy.
More specifically, the blockade of Iranian ports is expected to widen the underlying supply-demand gap - reflected in inventory draws - to 7.9 million barrels per day in April and 6.1 million in May (see chart below), the Société Générale team wrote in a Monday client note.
SOURCE: SG CROSS ASSET RESEARCH/COMMODITIES, IEA, KPLER, DOE
"Typically, a blockade does not mean a complete shutdown, but rather adisruption to the flow of imports and exports," said Tim Meehan, security director for assistance in the Americas at International SOS. "The U.S. blockade means that there will be a heightened military presence, increased inspections and the risk of vessel interference and seizure, which could complicate the importation and exportation of goods, especially oil," he told MarketWatch on Monday.
That's why Haigh and his team at SocGen now expect "market normalization" in mid-May, dialing back from their prior expectations for April. The blockade comes after weekend peace talks in Pakistan faltered. President Donald Trump said the U.S. Navy will sink any Iranian "fast attack ships" that come near the blockade.
The oil market was well-supplied before the Iran conflict, with the International Energy Agency estimating that global supply could exceed demand by nearly 4 million barrels per day in 2026, a record annual surplus. However, those inventories have been steadily drawn down over the past month, with the agency anticipating global oil supply to be slashed by 8 million barrels a day in March, or almost 250 million barrels in total.
Global oil supply in March plummeted by over 10 million barrels per day to 97 million barrels per day in March, with continued attacks on energy infrastructure in the Middle East and ongoing restrictions to tanker movements through the Strait of Hormuz leading to the largest disruption in history, according to the monthly report released by the IEA.
Despite the record surplus heading into 2026, higher oil inventories are still likely needed in the coming years due to growing supply uncertainty, said Parag Sanghani, senior portfolio manager at Westwood Holdings Group, which specializes in energy infrastructure investments.
He said some countries such as South Korea and India that rely heavily on oil and gas coming from the Middle East may need to build new strategic petroleum reserves in the next few years.
The IEA has previously projected that global oil markets face a significant oversupply that could last until at least the end of the decade. However, recent geopolitical tensions could accelerate this timeline by five to seven years, Sanghani told MarketWatch in a phone interview on Monday.
"Eventually, prices start to go up because the need for exploration increases and the need for new resources increases. We could have pulled forward that next cycle for new exploration as many as five years, maybe even six or seven years, depending on how long the war will last," he said. "We've got to start planning as an industry for that in the future."
West Texas Intermediate crude on Tuesday saw its May contract (CL.1) (CLK26) fall 2.7% to $96.31 a barrel after trading as high as $105.63 on Monday, while Brent crude futures for June delivery (BRN00) (BRNM26) were down 1.3% to $98.08 a barrel, according to FactSet data.
Myra P. Saefong contributed.
-Isabel Wang
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April 14, 2026 09:26 ET (13:26 GMT)
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