A 10 million barrels per day (mbpd) supply disruption, an 85 million barrel inventory drawdown in a single month, and crude prices holding above $115 per barrel have together signalled a sharp and sudden shift in global oil markets — from surplus to deficit — marking one of the most significant supply shocks in recent years.
India’s crude basket has averaged $115.22 per barrel in April so far, with spot prices at $107.66 per barrel as on April 22, reflecting the intensity of the global squeeze as supply disruptions linked to the Iran conflict choke flows and tighten availability.
The numbers underline the scale of disruption. According to Equirus Securities, the market has been hit by a ~10 mbpd supply shock, overwhelming the surplus that had defined 2025 and pushing global balances into deficit. Supply is now expected to decline by 1.5 mbpd in 2026, reversing earlier projections of growth.
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“The market has been hit by a ~10 mb/d disruption overwhelming expected surplus,” the report said, highlighting the speed at which the oil balance has turned.
Hormuz Bottleneck
The epicentre of the disruption lies in the Strait of Hormuz, where flows have dropped to 8–10 mbpd from around 20 mbpd pre-conflict, constraining one of the world’s most critical oil transit routes. The fallout has been immediate, with global inventories falling by 85 million barrels in March, signalling tightening physical supply.
Oil prices steadied on Thursday, holding on to gains from the previous session on stalled peace talks between Iran and the United States and continued restrictions on trade through the Strait of Hormuz.
Brent crude futures eased marginally by 19 cents, or 0.2%, to $101.72 a barrel by 1217 GMT after settling above $100 for the first time in more than two weeks on Wednesday. West Texas Intermediate futures were also down 19 cents, or 0.2%, at $92.77.
Even emergency measures have offered only partial relief. Strategic reserve releases of over 1 mbpd and drawdowns of nearly 2 mbpd from floating storage have helped cushion the blow, but effective supply remains sharply constrained.
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The deeper shift, however, is structural. According to Yes Securities Institutional Equities, the global oil market has moved from a surplus of 2.3 mbpd in 2025 to a deficit of 1.4 mbpd in early 2026, driven by production shut-ins of 7 mbpd in March and 10 mbpd in April.
“The Iran conflict has rapidly shifted the global oil market from a position of surplus in 2025 to a materially higher shortfall so far this year,” the report said, pointing to a collapse in spare capacity and a tightening supply environment.
Structural Deficits
Even as disruptions are expected to ease gradually — falling to 5.5 mbpd by June and 2.5 mbpd by the third quarter before normalising by end-2026 — prices are unlikely to retreat sharply.
“Oil prices are expected to embed a geopolitical risk premium of roughly $10–15 per barrel,” Yes Securities noted, projecting that crude will stabilise around $80–85 per barrel, rather than returning to pre-conflict levels.
This persistent premium reflects a key vulnerability — the erosion of effective spare capacity, particularly within OPEC, limiting the system’s ability to absorb shocks and amplifying volatility.
On the demand side, the price surge is beginning to weigh on consumption. Global demand growth is expected to remain flat in 2026, with recovery of around 1.6 mbpd only in 2027, as higher fuel costs curb consumption across key markets.
For India, the oil shock comes amid rising global uncertainty, but historical data suggests a degree of resilience. According to ASSOCHAM, the economy has sustained strong growth even during high oil price cycles.
GDP expanded 7.6% in 2022-23 when oil averaged $93 per barrel, and 7.2% in 2023-24 at $82 per barrel, indicating the economy’s ability to absorb energy price shocks without derailing growth.
“India has demonstrated its ability to manage high energy prices without compromising its economic growth trajectory,” said Nirmal Kumar Minda, President, ASSOCHAM, attributing this to strong consumption demand and sustained infrastructure spending.
Long-term trends reinforce this resilience. Between 2011 and 2014, when crude prices remained above $100 per barrel, India’s growth ranged between 5.2% and 6.4%, highlighting the economy’s ability to navigate high-cost environments.
However, the current oil cycle presents a different challenge. Unlike earlier demand-driven rallies, the present surge is supply-led, driven by geopolitical disruptions in critical transit routes.
With supply restoration expected to be gradual and a risk premium firmly embedded in prices, the oil market is entering a phase where geopolitics — not just fundamentals will dictate price movements, keeping volatility elevated.
The shift marks a new oil market reality from surplus comfort to supply shock, where even limited disruptions can trigger outsized price reactions, with implications for economies across the globe.
TOPICSCrude oilThis article was first uploaded on April twenty-three, twenty twenty-six, at forty-eight minutes past nine in the night.