Hormuz Strait is a no-talk zone! The "symbolic" increase in production by the eight major oil-producing countries failed to resolve the largest oil supply interruption in history.

The Organization of the Petroleum Exporting Countries (OPEC) issued a statement on the 5th, stating that the eight major oil-producing countries of "OPEC+" have decided to increase crude oil production by an average of 206,000 barrels per day in May. So far, these eight major oil-producing countries have announced consecutive production increases for two months. However, in the face of the historical largest crude oil supply interruption of up to 11 million barrels per day and continued disruptions to navigation in the Strait of Hormuz, this increase is negligible. With major oil-producing countries in the Middle East losing the ability to increase supply to the market due to conflicts in the region, this symbolic increase in production can only stay on paper. Since the end of February, the United States and Israel have launched strikes on Iran, resulting in the continued closure of the Strait of Hormuz, greatly reducing oil exports from Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq. Meanwhile, the war has caused severe damage to many key oil and gas production facilities in the Gulf region. Alternative routes bypassing the Strait of Hormuz are operating at full capacity and are not enough to compensate for the loss of oil exports due to the closure of the Strait. Other members of OPEC+ (such as Russia) are unable to increase production due to Western sanctions and damage to infrastructure during the Russian-Ukrainian conflict. Consultancy firm Energy Aspects stated that as long as the closure of the Strait of Hormuz continues, this production increase decision has "only academic significance". Jorge Leon, former OPEC official and current Head of Geopolitical Analysis at Rystad Energy, said, "In reality, the additional oil that the OPEC+ releases to the market is very limited. When the Strait of Hormuz is closed, the extra oil from OPEC+ becomes basically irrelevant." In a joint statement, the eight major oil-producing countries expressed concern over attacks on energy infrastructure, stating that the full recovery of damaged energy assets requires huge investment and time, thereby affecting overall supply. They emphasized that any actions that disrupt energy supply security, whether attacking infrastructure or disrupting international maritime routes, will exacerbate market volatility. The related oil-producing countries have taken proactive measures to ensure stable energy supply, especially by using alternative export routes, easing market volatility. In addition, several Gulf officials have also stated that even if the war ends and the Strait of Hormuz immediately reopens, it will take several months to resume normal operations and reach production targets. Sources from OPEC+ admitted that while the increase of 206,000 barrels per day this time is less than 2% of the scale of supply disruption caused by the closure of the Strait of Hormuz, it sends a signal that the alliance is prepared to increase production once the waterway reopens. It is worth noting that, according to reports, a source said that the United States and Iran have received a ceasefire agreement proposal which may take effect on the 6th. The source said that Pakistan has drafted a framework for ending the conflict and has communicated with the US and Iran. The proposal aims to achieve an immediate ceasefire, reopen the Strait of Hormuz, and reach a final agreement within 15 to 20 days. The final agreement may include Iran committing to not seek nuclear weapons in exchange for the lifting of sanctions and unfreezing of assets. On April 6, a senior Iranian government official stated that they have received the latest ceasefire proposal put forward by the mediator Pakistan and are currently reviewing its content. The official stated that Iran will not accept deadlines or pressure to make decisions. Iran will not reopen the Strait of Hormuz in exchange for a "temporary ceasefire". Iran believes that the United States is not ready to achieve a permanent ceasefire. Supply disruption warnings continue to escalate, increasing the risks of oil price increases The International Energy Agency (IEA) previously warned that the scale of damage caused to the global energy supply chain by the Middle East conflict is unprecedented, and the repair cycle will be lengthy. The IEA stated that the Middle East conflict has resulted in "serious or extremely serious" damage to over 40 energy facilities in nine countries, and the restoration of production in oil fields, refineries, and pipelines will take a considerable amount of time. This impact is equivalent to the combined effects of the two major oil crises in the 1970s and the natural gas crisis triggered by the 2022 Russia-Ukraine conflict. For the global energy market already facing severe supply shortages, the only way out in the short term is the reopening of the Strait of Hormuz for navigation. The head of the IEA, Birol, warned that if the Strait of Hormuz is not reopened for shipping, the amount of crude oil and refined oil lost in April will be twice that of March. Even if the conflict ends, it will take a long time to return to normal. As buffer measures are quickly exhausted, Morgan Stanley stated in a report on March 30 that the intensity of the Middle East oil supply shock is several times higher than the supply loss from Russia in 2022, and the most challenging issue is not crude oil, but refined oilaviation kerosene, diesel, and naphtha markets are entering a stage of substantial supply shortage. Analysts from the global commodity market information service provider ICIS also pointed out that regardless of how the Middle East conflict evolves in the coming weeks, the supply shock has irreversibly started, and its impact on energy, chemicals, and the global economy will gradually manifest in phases throughout the year, but has not been fully priced in by the market. Amid ongoing severe turbulence in the global energy market, several major banks issued warnings last week about the risk of oil price increases. Morgan Stanley stated in a report last Thursday that oil prices could skyrocket to $120 to $130 per barrel in the short term; if the supply flow through the Strait of Hormuz continues to be interrupted until mid-May, there is a risk of oil prices breaking through $150. Morgan Stanley warned that the extent and duration of any price surge will be a key factor in determining the severity of broader macroeconomic impacts. Continuing high oil prices will increase the risks of suppressed demand and potential economic downturn. Morgan Stanley's baseline scenario assumes that after a period of supply tension and inventory depletion, the closure of the Strait of Hormuz will ultimately be resolved through negotiations. In this scenario, it is expected that oil prices will remain above $100 per barrel in the second quarter. The report added that as the strait partially reopens and petroleum inventories return to a certain level of normalization, oil prices are expected to fall in the second half of 2026. Goldman Sachs pointed out that as long as oil transportation through the Strait of Hormuz is still restricted, oil prices may continue to rise in the short term. Goldman Sachs added that if the risk of interruption persists, the price of Brent crude oil may exceed its peak in 2008Brent crude oil reached $147.5 per barrel in 2008, setting a historical high. Energy market consultancy firm FGE NexantECA earlier last week stated that if the near-closure of the Strait of Hormuz due to the Middle East conflict continues for six to eight weeks, oil prices could soar to $150 or $200 per barrel. Fereidun Fesharaki, honorary chairman of the company, stated in an interview on Tuesday, "One hundred million barrels of oil cannot flow each week, and four hundred million barrels of oil cannot flow each month. Therefore, these losses will have astronomical effects on the market for a period of time." The outlook from Bank of America is more pessimistic. Analysts at the bank predict that due to the impact of the Middle East conflict, even if the conflict ends in a few weeks, the economy will still face slow economic growth, rising inflation, and $100 per barrel oil prices throughout the year. The bank's economists forecast that US economic growth in 2026 will be affected by 50 basis points, dropping to 2.3%. Current forecasts show that headline inflation in 2026 will reach 3.6%, higher than the previous projection of 2.8%. Economists globally have also lowered GDP forecasts to 3.1% and raised inflation expectations to 3.3%.