"Look Through" the Hormuz Shock if You Want. U.S. Inflation is Still Running Hot.

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I was only away in Yosemite for a week, but somehow that was long enough for the situation in the Gulf to go from “the U.S. is threatening to commit war crimes unless the Iranians open the Strait of Hormuz” to “the U.S. and Iran have a ceasefire to open the Strait” to “the U.S. has imposed its own blockade on the Strait of Hormuz”.With export options either limited or non-existent, and with storage facilities filling up, the U.S. Energy Information Administration (EIA) estimates that Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates (UAE) have slashed their combined production of crude oil by about 7.5 million barrels/day in March and will shut-in 9 million barrels/day in April, on average. The EIA further assumes that production in the affected countries will not return to normal until the end of 2026.Even this may be too optimistic. Rory Johnston estimates that shut-ins could approach 12 million barrels/day if the Strait remains closed through the end of April. Restoring production that has been shut-in will take time, even if there has been no long-term damage as a result of the conflict. While the world’s oil and products consumers went into the crisis with relatively abundant inventories, the shortfall in production is cumulating rapidly. The EIA estimates an inventory drawdown of about 460 million barrels in 2026Q2, much of which so far has been met by the depletion of strategic reserves, while Rory Johnston’s estimate is that there will be about 1 billion missing barrels by the end of July. If the Strait remains even partly closed after the end of this month, …