“Sleepwalking into Crisis”: Why The Oil Market Hasn’t Imploded Yet | Kpler’s Matt Smith
June 7, 2026
AI Summary
5 min readFour months into the closure of the Strait of Hormuz, the global oil market has not imploded. Oil prices are actually lower than they were before the conflict began. This is the central puzzle that Matt Smith, Director of Research at Kpler, walks through in this episode. The answer is not that the crisis has been averted. It is that the market has been sleepwalking, cushioned by a series of temporary buffers that are now approaching their limits.
The Strait Is Closed, But the Market Hasn't Broken — Yet
Before the conflict, roughly 15 million barrels per day of crude and another 5 million barrels per day of refined products like gasoline and diesel passed through the Strait of Hormuz. For over three months, those flows have essentially stopped. A handful of tankers — mostly Iranian, some paying tolls, some carrying humanitarian cargo — have moved through, but the two-mile-wide shipping lanes are effectively closed. The US blockade has also stopped Iranian tankers from leaving the region.
The result is that roughly 13 million barrels per day of production behind the Strait has been shut in. Onshore storage there is full. Tankers sit idle inside the waterway. Yet the global oil price has not exploded. The reason is a series of offsets that have kept the market from seizing up — for now.
The Offsets That Have Kept Prices in Check
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Show Notes
Sponsor: Teucrium Corn Fund (NYSE Arca: CORN):
In this episode of Monetary Matters, host Jack sits down with Matt Smith, the Director of Research at Kepler, to analyze how the global oil market is sleepwalking into a major supply crisis four months into the Iran war conflict. With the Strait of Hormuz closed for over three months, approximately 11 million barrels per day of crude supply have been removed from the market, forcing a global reduction of 9 million barrels per day in refinery runs. Smith explains that China's sudden decision to halt buying and scale back its own refinery operations temporarily freed up 4.5 million barrels per day for the global market, masking the true severity of the physical shortage. Meanwhile, the United States has acted as a primary buffer by heavily exporting refined products overseas, which has caused domestic inventories—particularly at the Cushing pricing hub—to deplete rapidly toward critical operational bottoms. Despite these deep structural deficits, headline benchmarks remain under $100 due to seasonal demand lulls and political interventions, leaving the trading market in a temporary state of complacency. Ultimately, Smith warns that a major market breakdown could occur as early as July when these dwindling stockpiles finally run dry and force a dramatic price response.
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