HOUSTON, May 19, 2026 – Oil markets are underestimating the lingering effects of the Strait of Hormuz closure, according to executives at Exxon Mobil and Chevron, even as U.S. emergency crude reserves drain at a record pace and Brent crude futures remain elevated above $111 a barrel.
U.S. Vice President JD Vance on Tuesday signaled progress in U.S.-Iran negotiations, prompting a modest pullback in prices. Brent crude for July delivery settled at $111.28 a barrel, while West Texas Intermediate crude for June ended at $107.77. Despite the diplomatic overtures, supply constraints persist, keeping pressure on refineries, airlines, and consumers.
The U.S. Strategic Petroleum Reserve released a record 9.9 million barrels last week, reducing stockpiles to approximately 374 million barrels. The International Energy Agency reported that global commercial inventories fell by 129 million barrels in March and another 117 million barrels in April, warning that some reserves now have only “several weeks” of coverage left.
Exxon CEO Darren Woods told analysts this month that the market has yet to fully price in the disruption. He noted that inventory drawdowns and strategic releases have so far cushioned the initial shock, but cautioned that prices could climb further if the strait remains closed. Woods estimated that even after a reopening, it could take one to two months for shipping flows to normalize.
Chevron CEO Mike Wirth echoed those concerns at a Milken Institute panel, warning of impending physical shortages. “We will start to see physical shortages,” Wirth said, adding that “demand needs to move to meet supply,” which would require economic slowdowns. He predicted Asia would feel the impact first due to its heavy reliance on Gulf oil, followed by Europe.
The IEA's May oil report highlighted that supply losses from Gulf producers have surpassed 1 billion barrels, with daily shut-ins exceeding 14 million barrels. According to the U.S. Energy Information Administration, Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain took 10.5 million barrels per day of crude offline in April. The EIA expects the Strait of Hormuz to remain largely closed through late May, with some movement in June, but full normalization of crude shipments likely not until later this year.
The impact varies among major oil companies. Exxon, which derives roughly 20% of its oil and gas output from the Middle East, reported a production decline. Chevron’s Middle East exposure is below 5% of total production. European majors BP and TotalEnergies, meanwhile, have benefited from trading desk gains amid price volatility.
Despite strong first-quarter earnings beats across BP, Chevron, Exxon, Shell, and TotalEnergies, none have raised their capital expenditure plans for 2026 or beyond, according to a Reuters analysis. Boardrooms remain focused on cash discipline rather than rapid output expansion.
The outlook remains highly uncertain. “A pretty significant binary outcome,” said John Kilduff of Again Capital, referring to the possibility of a deal or renewed military action. If Hormuz reopens and supply fears ease, prices could drop sharply. Conversely, a breakdown in talks could worsen shortages. The EIA projects Brent crude averaging around $106 a barrel in May and June before slipping to an average of $89 in the fourth quarter and $79 by 2027 as more Middle East supply returns.
