The US-Israel war with Iran was predicted to cause the worst energy crisis in history, according to the International Energy Agency .
Around 20% of the world's liquefied natural gas (LNG) and 25% of its seaborne oil supplies were affected . The impact should have eclipsed the oil shocks of the 1970s .
But despite early panic, the crisis hasn't been as widespread as anticipated. Oil prices have dropped, even though the Strait of Hormuz hasn't fully reopened .
Why? Four reasons. First, oil markets are behaving as if the conflict will be over soon. Second, other oil producers have seized the opportunity. Third, demand for oil has fallen. And fourth, nations have been burning through their oil reserves.
Is the crisis over? No. Oil reserves in many countries are now running low. The United States, the world's top user of oil, is about to enter peak driving season from this weekend. If the Iran war drags on, as seems likely , a true global crisis will be hard to avoid.
1: Oil markets have been subdued
This year's rise in global LNG prices look like a blip compared with the meteoric rises seen after Russia invaded Ukraine in 2022.
The effect on oil has been more pronounced. Prices of Brent crude futures - the global oil benchmark - have risen 72% since January, from US$61 to around US$105 a barrel (A$85 to A$153) as of May 21.
That's a sharp rise. But it's nowhere near the US$200 (A$281) forecast by some analysts in the war's early days. Other analysts expected oil prices to approach the record levels of around US$147 a barrel (A$206) reached in 2008, a few months before the global financial crisis began.
In reality, prices have yet to pass the high point of US$120 a barrel (A$168) seen in 2022.
Oil traders look to be acting in the hope the conflict will be over soon and normal oil shipments will resume.
Before the war, the world had a major oil surplus. Fracking has turned the US from major oil importer into the world's biggest producer and turned Argentina into an oil exporter .
Over the first ten months of 2025, global oil stocks rose an average of 1.2 million barrels a day. China was almost entirely responsible, adding around 1.1 million barrels a day to its stockpiles.
Before the war began in February, both Iran and Russia were looking for buyers of their sanctioned oil.
2: Different oil producers have boosted exports
Oil producers in the Middle East extract about 30% of the world's oil. The war has removed some of this supply.
In response, other oil-producing nations have ramped up exports.
US sanctions on Russian oil have been temporarily lifted , boosting global oil supply. But Russia's oil facilities have been repeatedly hit by Ukrainian drone strikes this year.
In the Americas, the US , Argentina, Brazil and Guyana have all upped output to partially fill the supply gap.
3: Demand for oil has dropped
Many nations are working to reduce demand for oil. Global demand for oil is expected to fall more than 2% this quarter. The drop is mainly in developing countries in Asia, the region most dependent on Middle Eastern oil.
Alongside the natural drop in demand from high prices, 76 countries have introduced emergency measures to cut oil demand further.
Australia has used energy diplomacy , securing more fuel supplies with deals to sell its gas and coal. These efforts have bolstered stockpiles of diesel, petrol and jet fuel.
To date, the only drop in Australian demand is jet fuel. In March, demand fell 18% below the previous month. Diesel use actually rose 4% that month.
4: Stockpiles are being used up
In March, the IEA brokered the largest releases of global oil stockpiles on record .
This move has probably done most to filling the supply gap.
China, the world's largest oil importer , has dipped into its enormous 1.4 billion barrel stockpile and cut oil buying.
Even so, global demand for oil is still outstripping supply . Global stockpiles are being used up at record rates and are now close to their lowest level in eight years .
At the start of the war 12 weeks ago, China had around 82 days' worth of supply. Given China uses around 17 million barrels of oil each day, its reserves would shrink to almost nothing within 11 weeks if not replenished.
As the northern hemisphere moves into summer, demand will rise in key nations. In the US, the Memorial Day long weekend traditionally marks the start of the peak driving season . While the US now produces much of its own oil, a spike in domestic consumption could make less available for export.
Slow-moving crisis?
Until now, this year's energy crisis has been felt most acutely in developing nations, where long queues for petrol and diesel have become common.
Richer countries have been able to insulate themselves better. But these measures have limits. The crisis is by no means over.
Oil supplies in rich countries could tighten further by early June, according to forecasts by JP Morgan Chase analysts. By September, reserves could fall to levels low enough to put real strain on economies. History suggests nations would slash demand for oil products before it got that bad.
If the conflict drags on and Middle Eastern oil remains off the market, rich countries will no longer be able to ride it out.
Kevin Morrison does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
