Iran last week opened the Strait of Hormuz to allow some Chinese oil ships move, in compliance with its management protocols. The Gulf state tightened its grip on the Strait of Hormuz from February 28 when it barred passage to vessels belonging to or affiliated with Israel and the United States following their joint strikes on the country.
Meanwhile, a senior naval official of Iran’s Islamic Revolution Guard Corps (IRGC) said 30 vessels had passed through the Strait of Hormuz since last Wednesday. The official added that different countries had accepted the Iran-designated route for passage through the strait.
Iran’s Foreign Minister, Seyed Araghchi said that the route was open to all commercial vessels, provided they cooperated with Iranian naval forces to pass through the waterway, adding that his country had not posed any obstacle to shipping through the strait, as he accused the United States of enforcing blockade on the way.
Araghchi, however, expressed hope that the situation could be ended with the removal of the US “illegal” blockade. Meanwhile, stakeholders have raised alarm over looming global shortage of Liquified Natural Gas (LPG) export disruptions in Middle Eastern LPG and reduced refinery operations have tightened propane and butane markets while US LPG exports have surged.
Experts forecast a contraction of global LPG demands by 420,000 b/d year-over-year in 2026 to 104 million b/d. The International Energy Agency (IEA) in its pre-Iran war Oil Market Report released this month predicted a downward revision of 1.3 million b/d, with mounting supply losses which are rapidly depleting inventories while volatility across crude and refined product markets continue to intensify.
The steepest decline is expected in second-quarter 2026, when demand falls by 2.45 million b/d year-over-year, including declines of 930,000 b/d in OECD countries and 1.5 million b/d in non-OECD economies. Petrochemical feedstocks and aviation demand have been hit hardest by the disruption.
LPG/ethane and naphtha account for roughly half of the 2026 demand downgrade from pre-conflict levels, while jet fuel and kerosene demand weakened sharply as airlines reduced flights in response to higher fuel costs and disruptions across Gulf aviation hubs.
Global oil supply declined by another 1.8 million b/d in April to 95.1 million b/d, bringing total losses since February to 12.8 million b/d, according to IEA. Output from Gulf countries affected by the closure of the Strait of Hormuz remained 14.4 million b/d below pre-war levels.
Higher production and exports from Atlantic Basin suppliers provided partial relief to the market. Assuming flows through the strait gradually resume beginning in June, global oil supply is forecast to decline by 3.9 million b/d on average in 2026 to 102.2 million b/d.
Global refinery crude throughputs are expected to plunge by 4.5 million b/d in second-quarter 2026 to 78.7 million b/d and decline by 1.6 million b/d to 82.3 million b/d for the full year as refiners contend with infrastructure damage, export restrictions, and lower feedstock availability.
Despite lower refinery runs, refining margins remained at historically high levels, supported by record middle distillate crack spreads.
