Rory Johnston

“The Strait of Hormuz is the single most important oil chokepoint on the planet. If you look at the daily volume of oil moving through that narrow maritime passage, it accounts for roughly 20 percent of total global petroleum consumption. There is no other piece of geography in the energy market that carries this kind of systematic risk, which is why market participants are so incredibly jittery when tensions flare in that region.”

“Global oil inventory buffers are historically thin compared to the levels we saw in previous decades. When you have low commercial stockpiles, the system loses its ability to absorb a supply shock without an immediate and aggressive price response. We are essentially running the global oil machine with very little margin for error, meaning any disruption doesn't just nudge the price—it potentially breaks it.”

“Closing the Strait of Hormuz is the scenario everyone in the industry hopes to avoid because it fundamentally changes the price floor of the commodity. If traffic through the Strait actually stopped for a sustained period, we are talking about a physical supply contraction that cannot be solved by diplomacy alone. In that world, reaching $200 per barrel ceases to be a fringe prediction and starts looking like an inevitability.”

“Spare capacity is the final line of defense against price spikes, and it is currently concentrated almost entirely in Saudi Arabia. Because so many other producing nations are already outputting at their maximum technical limit, the market is entirely dependent on Riyadh's willingness and ability to open the taps. If you want to understand the fragility of the current price, look no further than the centralized control of that remaining spare capacity.”