Brent crude just posted its steepest weekly decline since early April — an 11.15 percent plunge to $92.13 a barrel as of Friday, driven by hopes that the Strait of Hormuz might finally reopen. By Monday, prices had ticked back up to around $93 during Asian trading hours. The relief was audible.

It was also premature.

The Paradox of Cheaper Oil

Oil is getting cheaper. The economics are getting worse. That tension defines the current moment for Asia’s energy importers, who have spent three months watching the US-Israel-Iran war choke off the maritime artery that carried roughly 20 percent of the world’s crude and LNG supply.

The price drop reflects diplomatic optimism, not physical recovery. US President Donald Trump said over the weekend that Iran “really wants to make a good deal,” and negotiators are reportedly working on terms to reopen the strait. Iranian Foreign Minister Abbas Araghchi confirmed Sunday that “dialogue and an exchange of messages are ongoing” with the US, though he cautioned that “everything that is being said now is speculation.”

Markets have rallied on the prospect. Reality will take longer.

Why Asia Cannot Relax

Even if the strait reopened tomorrow, the damage is already compounding. Ship backlogs have built up over months of restricted traffic. Strategic petroleum reserves across Asia have been drawn down aggressively — Japan alone released roughly 80 million barrels, according to Fortune. QatarEnergy declared force majeure on LNG deliveries after missile strikes on the Ras Laffan export hub, the world’s largest, and Bloomberg reports that parts of the facility sustained damage its owner warned could take up to five years to repair.

Singapore’s foreign minister described the Hormuz closure as, “in a sense, an Asian crisis.” The numbers explain why: roughly 84 percent of crude and nearly 90 percent of LNG transiting the strait is destined for Asian markets, according to Fortune and the Observer Research Foundation. During the worst of the disruption, Dubai crude surged past $160 a barrel while West Texas Intermediate sat near $100 — a price gap that laid bare who was bearing the cost.

Countries Scramble for Cover

The policy responses have been emergency-grade. South Korea imposed its first fuel price cap in 30 years and restricted naphtha exports for five months. China banned exports of diesel, gasoline, and aviation fuel, a move that sent refined product spreads soaring — diesel and jet fuel in Singapore now cost roughly twice what they did two months ago, ORF reports. Japan petitioned the International Energy Agency for an additional coordinated reserve release.

Emerging economies face sharper constraints. Thailand capped diesel prices until subsidies ran dry, then lifted them. Indonesia is shielding pump prices ahead of holidays at mounting fiscal cost. Sri Lanka declared Wednesdays a holiday to conserve fuel. Pakistan told cricket fans to watch from home.

Asian refiners have cut output by 12 percent, according to ORF, and consultant FGE estimates regional oil demand is already down nearly 2 million barrels a day — not from efficiency gains, but from rationing, shortages, and curtailed economic activity.

The Long Tail of Disruption

The uncomfortable arithmetic: the Hormuz closure removed roughly 11 million barrels a day from global oil flows, according to Bloomberg’s calculations. Even after emergency stockpile releases, pipeline rerouting by Saudi Arabia and the UAE, and demand destruction, a gap of roughly 9 million barrels a day remained — more than the combined oil consumption of the UK, France, Germany, Spain, and Italy.

The buffers that prevented a full-blown panic are finite. Strategic reserves are depleting. The Russian and Iranian oil freed by temporary US sanctions waivers represents a one-time injection. And as TotalEnergies CEO Patrick Pouyanne warned at the CERAWeek conference in Houston: “If this crisis lasts more than three or four months it becomes a systemic problem for the world.”

Three months have already passed.

What Comes Next

If a deal materializes and Hormuz reopens, the recovery will be measured in months, not days. Ships don’t instantly un-backlog. Refineries that throttled output don’t spin back to full capacity overnight. Depleted inventories need refilling at prices that, while lower than March peaks, remain far above pre-war levels.

If the strait stays closed, the trajectory is darker. BNP Paribas energy strategist Aldo Spanjer put it plainly: “For as long as Hormuz remains closed, both oil and gas markets don’t balance.” The demand destruction required to force that balance would, by most estimates, demand prices significantly higher than today’s.

The oil price collapse is real. So is the bill. Asia is only beginning to find out how large it is.

Sources