Oil is abundant, perhaps too much so

The war in Iran is exposing critical bottlenecks in global energy logistics, as Middle Eastern storage fills and key producers are forced into shut-ins that function like sudden, negative inventory. With Saudi Arabia now cutting output alongside Iraq, Kuwait and the UAE, and Qatar’s LNG capacity curtailed, both crude and gas markets are losing meaningful supply just as strategic reserves are being tapped at record levels to stabilize prices.

Europe looks particularly vulnerable: gas storage is low heading into refill season, reliance on US LNG is near its limit, and alternative suppliers such as Qatar and Russia are constrained or redirecting flows toward Asia. Power prices in Europe and the UK are already surging, raising the prospect of rationing that could first hit energy-intensive industries before filtering through to households.

For investors, the length of the conflict will be decisive: a faster reopening of Hormuz would ease pressure on Europe and Japan in particular, while a protracted disruption argues for sustained volatility across energy commodities, power markets and exposed sectors.