The Strait of Hormuz has reopened — why that might be a problem for the oil market: Chart of the Day

July 5, 2026 - 18:11

The Strait of Hormuz has reopened after a brief closure, and tankers are once again moving crude through the narrow waterway that handles about a fifth of the world's daily oil supply. For most traders, that would be a clear signal that supply fears are over and prices should ease. But the current situation is more complicated than a simple reopening.

The problem is not the flow of oil itself. It is the destination. While cargoes are leaving the Persian Gulf, the world's largest crude importer is not buying. China, which typically absorbs a massive share of the oil that passes through Hormuz, has slowed its purchases to a crawl. Refineries there are running at lower rates, storage tanks are full, and the government is showing little appetite for spot cargoes at current prices.

That creates a strange paradox. The Strait is open, supply lines are moving, but the biggest customer is on the sidelines. As a result, oil is piling up in floating storage or being redirected to other regions that cannot absorb it quickly enough. This mismatch between supply and demand is putting downward pressure on prices, but not in the way a simple supply disruption would.

For the oil market, the reopening of Hormuz removes one risk, but the lack of buying from China introduces a different kind of uncertainty. Traders are now watching whether Beijing will step back in or let the market adjust on its own. Until that happens, the flood of oil may be more of a burden than a relief.