Early warnings surrounding the Strait of Hormuz suggested that European airports and fuel markets could face physical shortages by the beginning of summer. Those shortages largely failed to materialise, revealing both the adaptability of global energy markets and their persistent tendency to price worst-case scenarios long before they occur.
When the Strait of Hormuz was effectively closed at the end of February, the first forecasts were dramatic. The disruption affected a route that had carried nearly 20 million barrels per day of crude oil and petroleum products before the conflict, while Gulf exporters had also supplied a significant share of the world’s diesel, jet fuel and liquefied petroleum gas. Europe appeared particularly exposed because it imported far more aviation fuel than it produced and had relied heavily on supplies originating in the Middle East.
By April, warnings of physical shortages were becoming increasingly specific. The International Energy Agency estimated that Europe could begin running short of aviation fuel in June if it managed to replace only half of the supplies normally imported from the Gulf. Airlines warned that flights might have to be cancelled, airports considered contingency measures, and European officials began discussing the coordinated release and redistribution of jet fuel reserves. Ryanair suggested that a loss of 10% to 20% of available supply could force airlines to cut capacity during the summer season.
June has now passed, however, and European aviation has not ground to a halt. Petrol stations have not broadly run dry, diesel rationing has not been introduced and the widespread physical shortages that dominated the early discussion have not occurred. Prices increased sharply, inventories declined and individual routes became less economical, but the energy system absorbed a disruption that the IEA described as the largest in the history of the global oil market.
That outcome deserves more attention because it reveals something important about how energy crises are discussed. Markets are exceptionally good at identifying vulnerability, but they often treat exposure as though it were the same thing as inevitable collapse.
A Severe Disruption That Did Not Produce the Expected Shortage
The scale of the Hormuz shock should not be understated. At its worst, around 14 million barrels per day of oil supply were disrupted, equivalent to approximately 14% of global demand. Middle Eastern exports of refined products largely disappeared, several refineries and gas-processing facilities were shut down, and producers curtailed output because they could no longer export it or had nowhere to store it.
Jet fuel appeared to be one of Europe’s weakest points. The continent consumes roughly 1.6 million barrels per day of jet fuel and kerosene but produces closer to 1.1 million barrels per day, leaving a substantial structural import requirement. Before the conflict, most of those imports came from the Middle East. By April, shipments loaded in the region had essentially stopped, while stocks in major trading hubs were falling towards historically low levels.
On paper, the conclusion seemed unavoidable. Existing inventories would be drawn down, replacement cargoes would be insufficient, and physical shortages would emerge around June.
Yet energy balances are not static. The assumption that a missing barrel remains permanently missing overlooks the most powerful characteristic of internationally traded commodity markets: when scarcity raises prices, producers, refiners, traders and consumers all begin changing their behaviour.
Europe did not avoid shortages because the disruption proved less serious than expected. It avoided them because the rest of the system responded more aggressively than many of the early forecasts assumed.
The Supply System Moved Faster Than Expected
The most visible response came from emergency reserves. In March, the 32 members of the International Energy Agency agreed to make 400 million barrels of emergency oil stocks available—the largest coordinated release in the organisation’s history. This did not replace every lost barrel from the Gulf, but it created time for commercial supply chains to adjust and reassured refiners that additional feedstock would remain available.
Refineries then changed what they produced. European plants increased the share of each barrel converted into aviation fuel, pushing regional jet fuel yields to record levels. American refiners made a similar adjustment, with US jet fuel production exceeding two million barrels per day on a four-week-average basis for the first time. US exports subsequently reached record highs as European and Asian prices attracted supply across the Atlantic.
Alternative producers also redirected cargoes towards the highest-paying markets. Europe imported additional fuel from the United States, Canada, Nigeria, India and South Korea. Saudi Arabia increased shipments from its Red Sea port of Yanbu, allowing fuel to bypass Hormuz altogether. By early June, Saudi jet fuel flows to Europe through the Red Sea were reportedly higher than before the strait had closed.
These adjustments were neither free nor efficient. Cargoes travelled farther, refiners sacrificed the production of other fuels, traders paid higher freight costs, and airlines faced substantially more expensive contracts. Nevertheless, the physical product arrived.
The initial forecast had effectively treated Europe’s dependence on Middle Eastern aviation fuel as a fixed relationship. In reality, it was an economic relationship that could be reorganised once the price became high enough.
Demand Also Adjusted
Supply received most of the attention, but changes in demand mattered as well. Higher fuel costs made some airline routes uneconomic, leading carriers to reduce marginal services. Flights through and around the Middle East were cancelled or rerouted, lowering fuel consumption in precisely the regions experiencing the most severe disruption.
The reduction was not large enough to eliminate the supply gap by itself, but commodity markets do not require one dramatic intervention. They rebalance through hundreds of smaller changes: one refinery raises its jet fuel yield, another delays maintenance, an airline cancels an unprofitable route, a trader redirects a tanker, and a government releases stocks.
The process is messy and expensive, but collectively these adjustments transform an apparent physical shortage into a price shock.
This distinction is often lost during the first phase of an energy crisis. Analysts calculate existing inventories, subtract expected demand and identify the date at which storage should reach a critical level. The resulting deadline attracts headlines because it creates the impression of a countdown.
What such calculations cannot fully capture is how quickly the underlying variables change once the countdown becomes visible.
Energy Markets Price Fear Before They Price Adaptation
The tendency to exaggerate imminent scarcity is partly built into the structure of energy trading. Markets do not wait for a shortage to occur before reacting. Refiners bid for alternative crude, airlines secure cargoes months ahead, insurers raise premiums, and traders price the possibility that tomorrow’s supply will be worse than today’s.
This behaviour is rational at the level of the individual company. An airline that waits until fuel is physically unavailable has already failed. A refiner that assumes replacement cargoes will emerge eventually may be forced to shut down before they arrive.
Aggregated across the market, however, rational precaution can look like panic. Everyone competes for the same replacement barrels simultaneously, pushing physical prices far above futures benchmarks. During the early stages of the Hormuz crisis, some immediately deliverable crude grades approached $150 per barrel even while futures markets remained considerably lower.
Those prices then generated the very response that prevented the shortage. The premium attracted American exports, encouraged European refiners to alter yields and justified the cost of transporting fuel across much longer routes. High prices were not merely a symptom of the crisis; they were part of the mechanism through which the crisis was contained.
Markets therefore appear to overreact partly because their reaction changes the outcome. A prediction of severe scarcity drives behaviour that prevents the predicted scarcity from materialising.
Resilience Does Not Mean the Warnings Were Meaningless
It would nevertheless be wrong to conclude that the early warnings were fabricated or that Europe’s fuel security is stronger than previously believed. The IEA forecast was explicitly conditional: shortages could arise if Europe replaced only half of the missing Middle Eastern supply. Europe ultimately replaced more than that through emergency reserves, additional refinery production and imports from alternative regions.
The absence of widespread shortages is therefore not evidence that the original vulnerability was imaginary. It demonstrates that the response was effective.
The system also remains under pressure. European jet fuel inventories were estimated at only around 38 million barrels in early June, offering less than one month of demand coverage. Diesel markets are even tighter following Russia’s decision to restrict exports after attacks on its refining sector. European diesel margins have risen to exceptional levels, while inventories in both Europe and the United States remain below historical averages.
Europe has passed the original June deadline, but it has not escaped the crisis. It has converted the immediate risk of running out of fuel into a prolonged period of elevated costs and reduced buffers. A second major disruption would therefore begin from a weaker position than the first.
The Difference Between Scarcity and Expensive Abundance
This may be the central lesson of the Hormuz crisis so far. Modern energy systems are more resilient than their headline vulnerabilities suggest, but that resilience is primarily economic rather than comfortable.
Fuel remains available because consumers pay more, governments release reserves, refiners change production patterns and trade routes become longer. The system does not maintain normality; it prevents collapse by making scarcity expensive enough to mobilise alternatives.
From a consumer perspective, this can feel like failure. Airlines cut routes, ticket prices rise and diesel becomes more expensive even though no formal shortage exists. From the perspective of energy security, however, the distinction is significant. A high-priced market still allocates fuel. An empty market cannot.
The world has now absorbed a disruption that removed, at least temporarily, more oil supply than any previous crisis. That achievement reflects spare production outside the Gulf, strategic reserves, flexible refining, global shipping and weaker demand growth. It also reflects decades of diversification following earlier oil shocks.
Yet the public narrative remained focused on the date at which reserves were supposedly going to run out, rather than on the extraordinary industrial response taking place before that date arrived.
Panic Is Part of the System, but So Is Adaptation
Energy crises will always produce dramatic forecasts because the consequences of being unprepared are severe. Governments and companies should plan around adverse scenarios rather than assume markets will solve everything automatically. The strategic stock release, refinery adjustments and alternative sourcing that protected Europe did not occur by accident.
At the same time, the Hormuz experience should encourage greater scepticism towards countdown-style claims that a continent will “run out” of a globally traded commodity on a particular date. These projections often assume that production, trade and consumption remain unchanged while inventories fall. Once prices move sharply, almost none of those assumptions survive.
Europe did not emerge untouched. It paid more for oil, diesel and aviation fuel, depleted part of its emergency cushion and became dependent on longer and less efficient supply chains. The crisis also exposed weaknesses in European rules that require general oil reserves but do not guarantee adequate stocks of specific products such as jet fuel.
Nevertheless, the feared physical breakdown did not happen. The energy system bent, repriced and reorganised itself faster than expected.
That does not make the Strait of Hormuz unimportant, nor does it mean another escalation would be harmless. It does suggest that global energy markets are more adaptable than the first weeks of panic usually imply. The recurring mistake is to identify a serious vulnerability and then assume it must inevitably produce the worst possible outcome.
Hormuz has demonstrated something more complicated. The vulnerability was real, the disruption was historic and the warnings were understandable. Yet the world found new barrels, changed refinery output, redirected ships, released reserves and reduced demand before the predicted deadline arrived.
The energy market did what it often does during crises: it panicked first and adapted immediately afterwards.
By Leon Stille for Oilprice.com
