Oil: Hormuz disruption keeps market strained – Societe Generale

Projected Oil Price

> $200/bbl

Expected price level for oil due to tight market conditions.

Cumulative Draw from European Inventories

~25.7 million barrels

Estimated draw from European inventories in a prolonged disruption scenario.

Remaining European Stocks

~16.3 million barrels

Projected level of European oil stocks, equivalent to less than 10 days of cover.

§ 01 Executive Snapshot

What: Proposed U.S–Iran ceasefire framework may gradually restore oil flows through the Strait of Hormuz.
Who: Analysts Michael Haigh and Jeremy Sellem from Societe Generale.
Why it matters: The framework is expected to keep oil markets tight and prices elevated, impacting global supply dynamics.

Proposed ceasefire could allow physical flows to resume by August 31, 2026, just before the end of the U.S. driving season.
Prices are projected to stay above $200/bbl due to tight summer balances and delayed normalization of Hormuz flows.
Global gasoline and diesel stocks are set to remain below five-year averages through the remainder of the year, reinforcing a structurally tight products market.
A prolonged disruption scenario could lead to a cumulative draw of ~25.7 million barrels from European inventories, leaving stocks at just ~16.3 million barrels.

The Strait of Hormuz is a critical chokepoint for oil transportation, and disruptions significantly impact global oil supply.
Previous geopolitical tensions have historically led to volatility in oil prices and supply chain disruptions, with this current situation echoing past crises.

Immediate implications include continued high oil prices and tight supply conditions, affecting consumers and businesses reliant on oil.
Long-term operational implications may involve shifts in energy sourcing and inventory management strategies for companies in affected regions.

Potential regulatory risks associated with U.S. and Iranian political decisions could affect the ceasefire's implementation.
Infrastructure dependencies and competition from alternative energy sources may challenge traditional oil market dynamics.

Monitoring the ratification process by President Trump and Iranian leadership on the proposed ceasefire framework.
Future developments will be signaled by changes in global oil prices and inventory levels, particularly in Asian markets.

§ 07

What is the proposed U.S–Iran ceasefire framework?

It is a framework that may gradually restore oil flows through the Strait of Hormuz.

Why is the Strait of Hormuz important for oil transportation?

It is a critical chokepoint for oil transportation, and disruptions there significantly impact global oil supply.

How are oil prices expected to be affected by the proposed ceasefire?

Prices are projected to stay above $200/bbl due to tight summer balances and delayed normalization of Hormuz flows.

When could physical oil flows resume through the Strait of Hormuz?

Physical flows could potentially resume by August 31, 2026, just before the end of the U.S. driving season.