By Lori Ann LaRocco – The price of crude oil doesn't match the actual supply situation in the Middle East. This discrepancy could impact the upcoming U.S. midterm elections.
Oil prices have dropped below $90, largely because there haven't been any military strikes or attacks recently, rather than due to a change in supply conditions.
Trade processes take time.
The last shipment of oil from the Port of Yanbu left a week ago, and it will take several weeks for that oil to reach its destinations. Additionally, the extra $200 million worth of oil that was exported after a recent agreement still needs to be delivered and consumed. Newly rerouted tankers that are avoiding the Bab el-Mandeb Strait will take longer to arrive, as they will require smaller vessels to pass through the Suez Canal before transferring to larger tankers.
Some tankers have chosen longer routes around the Horn of Africa before moving through the Suez to get to Yanbu. This detour increases tanker profitability due to longer transit times but also delays crude oil deliveries.
“This is going to add about 60 days to the transportation time for oil heading to Asia, plus there's the logistical challenge of switching from large tankers to smaller vessels that can navigate the Suez, or piping oil from a ship,” said Dr. Karen E. Young, Senior Fellow at the Middle East Institute.
Flow through two crucial waterways, the Strait of Hormuz and the Bab el-Mandeb Strait, is currently slow.
The Red Sea has traditionally been a major trade route, covering about 12% to 15% of global trade and transporting up to 9 million barrels of oil daily. The Suez Canal accounts for roughly 20% of worldwide trade.
Current shipping data from Windward indicates that today's transits are a mere fraction of what should be moving.
The situation in the Red Sea worsens the crude oil shortage, which is already impacted by the partial closure of the Strait of Hormuz and Russia's difficulties in exporting refined products due to strikes on infrastructure in Ukraine.
It’s a compounded problem, and the gap in crude supply is widening.
Energy experts express uncertainty about how this situation will unfold.
“There's hope for a resolution to reopen the Strait of Hormuz, but there's also fear that nothing will change for months, leading to depleted commercial inventories and potential price spikes,” said Andy Lipow, president of Lipow Oil Associates. “As long as there are uncertainties in oil supply and demand, prolonged disruptions in the Middle East could directly affect the midterm elections.”
After U.S. and Israeli actions against Iran on February 28, 2026, the Port of Yanbu became a symbol of trade resilience. Saudi Arabia had to shift over 70% of its crude exports overland to its Red Sea terminal in Yanbu. Now, that shift is under pressure. While trade will continue, the main issue is that there isn't enough supply to meet demand.
As I have previously highlighted, it will take time for refinery capacity to recover. Any damage caused by Iran needs proper repairs, and new pipelines are still under construction. Additionally, pipelines themselves can become targets.
A recent report from the U.S. Department of Energy stated that refinery activity and product supply in the Middle East are slow to bounce back after disruptions:
“Exports of LPG and refined products in June were less than half their levels before the conflict, while crude oil shipments were nearly three-quarters of their February volumes. Key refineries’ operations in the Gulf have yet to resume, indicating ongoing constraints. Compounded by increasing Ukrainian attacks on Russian facilities, product markets in Russia and beyond are tightening, affecting both exports and domestic fuel supplies.”
The current dynamics of supply and demand show a clear need for more oil. Disruptions could extend over the next three months, according to Young.
“It greatly depends on China,” she noted. “When will Chinese demand recover? That’s about 45 million barrels a day, and they’ve indicated they are fine for now. The real question is whether China will engage diplomatically in this conflict. There have been discussions about potential mediation with Pakistan.”
Young also referenced a recent J.P. Morgan report suggesting that China can manage without 4 million barrels a day for another three months.
“This could provide a buffer, but if the issues in the Strait of Hormuz and the Bab el-Mandeb continue, we will need to release inventories. For one month of disruption, about 200 million barrels would be necessary; for two months, 315 million; and 500 million barrels for three months. The question is whether there are enough strategic reserves available for release,” Young emphasized. “The U.S. Strategic Petroleum Reserve has diminished to 311.45 million barrels, its lowest level since 1983, which is just 43.6% of its total capacity of 714 million barrels.”
Companies like Marathon and Delta Airlines have utilized the SPR for U.S. consumption.
“A significant amount of SPR oil is being exported, but some is still being used domestically,” said Lipow.
Three months is a long time in politics.
This conflict has brought about hasty supply adjustments as negotiations begin and then collapse. This situation has allowed the current administration to reduce crude prices just before the nation’s 250th birthday. It remains to be seen if there will be another agreement to reinject crude into the market as a delay tactic beyond the midterm elections.
Only time will reveal the outcome; meantime, the window for a solution is closing.