Asia Most Exposed As Iran Conflict Rapidly Drains Global Oil Buffers

The world is burning through oil inventories at a record pace as the Iran war continues to disrupt flows from the Persian Gulf, rapidly eroding the global buffer that protects economies from supply shocks and extreme price spikes.

According to a Bloomberg, global stockpiles have plunged sharply since the near-closure of the Strait of Hormuz began nearly two months ago, leaving governments and industries with fewer tools to manage supply disruptions.

Morgan Stanley estimates that global oil inventories fell by around 4.8 million barrels per day between March 1 and April 25 — marking the steepest quarterly drawdown in International Energy Agency data. Crude oil accounted for nearly 60% of the decline, while refined fuels made up the rest.

Analysts warn that the market is approaching "operational minimum" levels, where inventories cannot fall much further without disrupting pipelines, storage facilities and export infrastructure.

"Inventories are acting as the shock absorber of the global oil system," Natasha Kaneva, head of global commodities research at JPMorgan Chase, said in the Bloomberg report. "But not every barrel can be drawn."

Asia Faces Immediate Pressure

The pressure is most visible in fuel-import-dependent Asian economies such as Indonesia, Vietnam, Pakistan and the Philippines, where traders warn inventories could hit critical levels within weeks if disruptions continue.

India has already begun facing shortages in liquefied petroleum gas supplies, while higher fuel costs are adding pressure on inflation and household spending.

However, larger economies such as China and South Korea remain relatively comfortable for now, with robust crude inventories and stable fuel reserves. Singapore’s fuel-storage hubs also remain above seasonal averages.

Geospatial analytics firm Kayrros estimates that China's crude inventories have actually increased during the conflict.

West Also Under Stress

The impact is not limited to Asia. European jet-fuel inventories are depleting rapidly ahead of the summer travel season, with some analysts warning of stress levels by June.

The United States, now acting as a key supplier of last resort, has also seen inventories fall below historical averages as exports rise sharply. US crude stockpiles, including the Strategic Petroleum Reserve, have declined for four consecutive weeks, while distillate inventories recently fell to their lowest levels since 2005.

Gasoline stockpiles in the US are also hovering near their weakest seasonal levels in over a decade.

Prices, Inflation Risks Rising

The disruption has already pushed crude oil and fuel prices sharply higher, intensifying fears of inflation and raising the risk of a broader global economic slowdown.

Analysts say that if the Strait of Hormuz remains partially blocked into June, oil prices may need to rise further to suppress global demand and rebalance the market.

JPMorgan estimates assume demand destruction of around 5.6 million barrels per day between June and September to stabilise the system.

Goldman Sachs noted that weaker Chinese demand may have slightly slowed the inventory drawdown in recent days, though visible global oil stocks remain near their lowest levels since 2018.