Summary: A recent Global Energy Weekly note from Bank of America Global Research documents a dramatic collapse in oil and product movements through the Strait of Hormuz - from roughly 20 million barrels per day to under 2 mb/d. The bank has updated its baseline to reflect a longer-lasting conflict scenario, now projecting a 4 mb/d supply deficit in the second quarter of 2026 and lifting its Brent crude average forecast to $92.50 per barrel for the year. Analysts warn that if disruptions continue beyond a matter of weeks, physical supply constraints could trigger demand rationing and a stagflationary drag on growth.
- Key points:
- Oil and product flows through the Strait of Hormuz have fallen from about 20 mb/d to under 2 mb/d, according to BofA's Global Energy Weekly.
- BofA now factors a 4 mb/d supply deficit in Q2 2026 and has raised its Brent crude average forecast to $92.50 per barrel.
- Limited pipeline offsets exist from Saudi Arabia and the UAE; consuming nations are drawing inventories down while Gulf producers build stocks they cannot export.
The Bank of America note portrays the current situation as a structural market shock rather than a short-lived disruption. Satellite tracking and ship movements suggest a rapid market tightening, but global prices have not yet fully absorbed the extent of the shock - a gap BofA attributes to emergency stock releases and oil already at sea.
With flows through the Strait reduced to a fraction of normal levels, the report highlights a widening disconnect: storage is accumulating within Gulf producer countries that are unable to export, while consuming countries are depleting inventories at a pace the bank deems unsustainable. The limited additional capacity to move product overland - primarily through Saudi and UAE pipelines - provides only partial relief to global refining hubs.
Bank of America has materially adjusted its baseline outlook to account for what it views as a longer conflict. The firm now projects a 4 million barrels per day supply shortfall in the second quarter of 2026 and has elevated its Brent crude average forecast for the year to $92.50 per barrel. The note warns that if the shortfall persists, the only way to rebalance the market without further price escalation would be a 4% to 5% year-over-year contraction in global energy demand.
The report cautions that sectors with few immediate substitutes - notably transportation and petrochemicals - face the clearest risk of forced consumption cuts. BofA uses the term "demand rationing" to describe a scenario in which physical availability, rather than price alone, becomes the primary constraint. Institutional investors, the bank says, are increasingly focused on the physical availability of product rather than just market price.
Analysts emphasize that the current market complacency is rooted in expectations of a brief conflict. If the situation extends beyond the next two to four weeks, BofA warns, the global oil supply chain could reach a breaking point. That would create not only higher energy costs but also a practical inability to move product to key refining centers, a dynamic the report characterizes as a stagflationary drag on global growth.
Market participants are watching closely to see whether emergency international measures can restore maritime security in the Strait before inventories in consuming countries are exhausted. The report implies that absent a restoration of safe transit, even substantial emergency releases may be insufficient to prevent severe market dislocation.
- Risks and uncertainties:
- Duration risk - if disruptions persist beyond 2-4 weeks, the global oil supply chain may break, affecting transportation and petrochemical sectors.
- Inventory depletion risk - consuming nations are drawing down stocks at an unsustainable rate, raising the possibility of physical shortages at key refining hubs.
- Limited offset risk - available pipeline alternatives from Saudi Arabia and the UAE are insufficient to fully replace lost maritime flows, constraining relief options.