Shrinking Global Stockpiles and the Risk of a New Consumer Price Shock

“Few merchant shipping companies and their ships are confident that the US can ensure their safe transit of the strait,” said Carl Schuster, former director of the US Pacific Command’s Joint Intelligence Center.

Those fears are hardly unfounded. At least four vessels were attacked by drones and missiles in the strait last week alone.

Since the war began, the United Kingdom Maritime Trade Operations (UKMTO) has recorded 54 reports of damage to vessels in the strait, the Arabian Gulf and Gulf of Oman, with three vessels confirmed as total losses and 13 near misses.

Iran does not even need to attack every vessel to keep shipping companies nervous. It can harass ships with drones and conduct “targeted surveillance of merchant shipping”, UKMTO said in a recent advisory.

The danger is also driving up insurance costs, adding to the expense of moving energy and goods.

Higher energy costs can also travel far beyond petrol stations. Oil affects aviation and road transport, manufacturing, petrochemicals and the movement of goods, meaning a prolonged increase in costs can eventually work its way through wider economies.

That is why the erosion of global stockpiles matters even at a time when oil prices are not continuously surging.

“Until you can ensure safe use of the strait, you do not have total control,” Schuster said.

The unusual reality of Hormuz is that Washington and Tehran possess very different forms of leverage.

The US naval blockade of Iran remains in force, barring ships from travelling to or from Iranian ports inside or outside the strait. That has severely restricted Iranian maritime trade and squeezed Tehran’s cashflow.

Iran, however, sits beside the waterway and retains the ability to make commercial shipping dangerous

CNN military analyst and retired Air Force Col. Cedric Leighton said neither side therefore exercises complete control.

“What you’re really dealing with is a standoff here,” he said.

“Because of the proximity of US forces, because of the blockade, and because of Iran’s ability and willingness to at least threaten the use of mines and the use of small boats to harass vessels … neither side is really able to exercise full control over the strait.”

Iran, meanwhile, appears prepared to play a long game. Mohammad Reza Naqdi, a senior adviser to the Revolutionary Guards, said Tehran could “prolong” the war until Trump is out of office.

That raises the stakes for Washington as the November midterm elections approach and cost-of-living pressures become increasingly important.

For consumers, however, the equation is simpler. Inventories, alternative supplies and reduced consumption helped the world absorb the first shock.

But every barrel drawn from that cushion leaves less protection against the next one — and as long as ships remain reluctant to return to Hormuz in normal numbers, that cushion will remain under pressure.