Oil prices have started to slip — but not necessarily for reasons that suggest a return to market normalcy. There’s a pullback happening, sure, yet the underlying story Misryoum newsroom reported is less comforting: demand is starting to break down as scarcity and higher prices persist.
Misryoum editorial desk noted that the International Energy Agency said Tuesday that “demand destruction” has begun to unfold. The trigger, in this account, is acute energy commodity shortages tied to the closure of the Strait of Hormuz. When supplies tighten this way, oil can become so expensive that overseas businesses and households start curbing investment and consumption. The report described how countries in Asia, Europe and even other parts of the Middle East that depend on supplies passing through the strait have begun curtailing their use of natural gas, while waves of flight cancellations have also appeared alongside policies aimed at reducing overall fuel use. Somewhere in that chain, you can almost feel the everyday friction—like the kind of pause you hear at an airport gate when screens keep refreshing and people just wait.
The IEA’s concern is that this is more than a temporary squeeze. “Demand destruction will spread as scarcity and higher prices persist,” it said, with the implication that global economic growth could be affected. It’s not yet clear, Misryoum analysis indicates, that the U.S. economy is seeing the same kind of hit, but any impact there could threaten to destabilize an already fragile labor market. In other words, the fear isn’t only about energy prices; it’s about what happens when consumers and companies decide, quietly but collectively, to do less.
Misryoum newsroom reported the timing is tangled with policy pressure. The report comes as President Donald Trump has announced a targeted blockade of the Strait of Hormuz in a bid to increase economic pressure on Iran. Traders have started pricing in this new dynamic. The international price of a barrel has fallen to less than $98 after rising to as much as $118, while U.S. crude has fallen to $95 a barrel after hitting approximately $113 earlier this month. U.S. gasoline prices have also begun to show slight declines from recent highs, according to AAA data. Some of that easing is being linked to hopes that the ceasefire announced last week will hold, but the blockade is likely also playing a role—because as supply shortages get more acute, demand by definition has to decline.
Misryoum editorial team stated the IEA singled out the return of flows as the key variable: “Resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy.” It’s a stark line, and it also hints at why the “slip” in prices might be misleading. The market can adjust while the damage is still spreading.
In a note to clients published March 31, Joseph Brusuelas, chief economist at RSM consultancy, discussed the lasting harm demand destruction can have on the economy — and why restrictions through the strait of other key industrial inputs besides crude oil, whose prices are also spiking, will also play a role. “It means fewer cars sold, fewer homes bought, fewer restaurant meals, fewer business investments, and eventually fewer jobs,” he wrote. “And because the Strait of Hormuz crisis isn’t just about oil, the demand destruction this time could reach further than any standard model would predict.” Brusuelas added that changes in the economy since the 1970s may make the U.S. consumer impact less severe than in earlier decades, pointing to more energy-efficient vehicles and work from home, plus the fact that the U.S. is now a net oil producer. “There is a real buffer,” he wrote.
Still, Misryoum newsroom reported that buffers don’t remove risk—especially if disruption drags on. On its latest earnings call Tuesday, J.P. Morgan executives said they had not yet seen U.S. consumers making significant changes in consumption as a result of higher oil prices. “Tt’s not nothing, but it’s not overwhelming,” chief financial officer Jeremy Barnum said. But Brusuelas warned the U.S. would not be out of the woods in a prolonged-conflict scenario. “None of these buffers have ever been tested against a disruption this large, hitting this many commodities at once,” he wrote. “If the strait stays closed past the summer, the probability of a recession would most likely be higher than 50%.” Even the way this is phrased leaves room for doubt—except the direction of travel feels pretty clear.
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