Influenced by rumors of potential US-Iran negotiations, Brent crude prices have temporarily lost upward momentum, falling back to $96. However, supply-side tensions have not eased: oil flows through the Strait of Hormuz remain more than 95% below normal levels, and the overall oil flow deficit in the Persian Gulf has expanded to 17.7 million barrels per day. Meanwhile, demand-side pressures are accelerating.
Refinery capacity has been hit hard, refined product prices are soaring, and the demand destruction effect has begun to spread from Asia. Multiple airlines are cutting flights due to rising fuel costs, many Asian countries are implementing work-from-home arrangements to control road fuel consumption, and economies such as South Korea have successively implemented export bans or price control measures for gasoline, jet fuel, and diesel. Analysts warn that if the supply chain cannot be restored within days, demand destruction will quickly spread to Europe and globally.
On the supply side, Trump's recent comments on potential US-Iran negotiations, coupled with rumors of a ceasefire agreement, have pressured oil prices downward. According to CCTV News, a spokesperson for Iran's Khatam al-Anbiya Central Headquarters directly addressed the U.S. on the 25th local time: &#34;The Americans are negotiating with themselves; do not call your failure a deal.&#34;
Despite official Iranian denials of contact with the U.S., Israel subsequently confirmed that indirect communications exist, briefly easing market pricing of the risk of prolonged disruption. Goldman Sachs currently expects the disruption of oil flows through the Strait of Hormuz to last until April 10.
Under the dual pressure of supply and demand, the &#34;backlash&#34; of high oil prices on demand is evolving from a regional phenomenon into a global challenge.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/14b1318c-05b5-4009-9f63-9957108caa00.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/14b1318c-05b5-4009-9f63-9957108caa00.png"/>
<h2>Demand Destruction: Asia First Under Pressure, Risk of Spreading Rises</h2>
The cumulative effect of supply chain shocks is rapidly translating into material demand destruction. Significant price increases for jet fuel and diesel have already clearly suppressed terminal consumption. Multiple airlines have announced flight reductions, while policymakers in some Asian countries are pushing for broader work-from-home arrangements to alleviate pressure on road fuel demand.
In terms of policy response, South Korea has set price caps on gasoline and diesel to protect domestic consumers from the impact of soaring wholesale prices. Several European countries have also successively introduced export restrictions on certain oil products.
Analysts point out that current demand destruction is still in its early stages and is concentrated in Asia. If the supply chain cannot return to normal within days, rather than weeks, this effect will quickly spread to Europe and eventually affect other regions globally. Historical experience shows that once a shortage of refined products triggers a chain reaction, the recovery cycle is often much longer than initially expected.
<h2>Energy Shock Spreads Outward, Market Re-evaluates Inflation Risk</h2>
Energy shocks are transmitting to broader asset classes. The linkage between crude oil prices, U.S. Treasury yields, and breakeven inflation rates is tightening again, with the market rapidly repricing a &#34;second wave of inflation&#34; rather than dismissing it.
In the interest rate market, if the U.S. 10-year Treasury yield breaks above 4.4%, the situation will no longer be limited to the interest rate market but will evolve into systemic pressure across multiple asset classes including stocks, credit, and foreign exchange. Currently, the stock market's pricing of this risk remains insufficient.
Emerging markets are bearing the triple shock of oil prices, interest rates, and volatility. EEM (Emerging Markets ETF) is testing a key trend support line, and the emerging market volatility index VXEEM is climbing rapidly. Once support is broken, selling pressure may accelerate rather than level off.
<h2>Supply-Side Pressure Unresolved, Offshore Storage Nears Capacity</h2>
The situation in the Strait of Hormuz remains grim, continuing to provide support for high oil prices. In the past few days, average daily tanker traffic through the strait has been only about 2 vessels, with oil flow down 95% from normal levels, although it has recovered slightly recently. U.S. officials have confirmed that naval mines laid by Iran remain in the waters of the strait, posing a persistent threat to shipping.
Broader Persian Gulf flow data is equally severe. Factoring in pipeline diversions through Yanbu and Fujairah, Persian Gulf oil flow losses (4-day moving average) have expanded to 17.7 million barrels per day. Traffic through the strait is 98% below normal levels at only about 400,000 barrels per day, while net pipeline diversion supplements are approximately 1.9 million barrels per day.
Meanwhile, floating storage from the Persian Gulf has accumulated 74 million barrels since February 27, approaching the estimated shipboard storage limit at that time, indicating that offshore storage space for Gulf producing nations is gradually tightening. If supply-side pressure is further transmitted downstream, it will add new variables to the refined product market already suffering from demand destruction.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/342cc651-aec8-4adf-b71c-50f77a3b464d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/342cc651-aec8-4adf-b71c-50f77a3b464d.png"/>
<h2>Refinery Facilities Become Primary Targets, Refined Product Supply Predicament Hard to Resolve</h2>
Supply-side pressure is extending from crude oil to refined products. The International Energy Agency (IEA) estimates that since the outbreak of this conflict, at least 40 energy assets in the Middle East have suffered serious damage. Notably, substantial damage is currently concentrated in refining facilities rather than crude oil production facilities, most of whose production cuts remain precautionary shutdowns.
Among them, Kuwait's Mina Al-Ahmadi refinery was attacked last Friday, leading Goldman Sachs to raise its estimate of refinery capacity disruption in the Middle East to 2.3 million barrels per day. The sustained damage to refining capacity means that even if crude oil production remains relatively stable, the tight supply situation for refined products will persist.
Attacks on energy assets have subsided over the past two days, but Israel and the U.S. previously struck natural gas facilities in Iran's Isfahan province. Market concerns about a new round of actions have not dissipated, and the risk premium for Gulf energy infrastructure remains high.

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Crude oil supply-side tensions persist, with oil flows through the Strait of Hormuz down more than 95% from normal levels. The severe blow to refining capacity has driven up refined product prices, and the demand destruction effect has spread from Asia: airlines are cutting flights, multiple countries are implementing work-from-home policies, and economies like South Korea are implementing price controls. Analysts warn that if the supply chain does not recover within days, the shock will rapidly spread to Europe and globally

- Brent crude oil prices have lost upward momentum, falling to $96, influenced by rumors of potential US-Iran negotiations, despite ongoing supply constraints with oil flows in the Strait of Hormuz down 95% from normal levels.  
- Demand destruction is emerging, particularly in Asia, where rising fuel costs have led airlines to cut flights and some countries are implementing home office policies to manage fuel consumption.  
- Analysts warn that if supply chains do not recover soon, these demand impacts could quickly spread to Europe and beyond, exacerbating global challenges.

High Oil Prices Are "Killing Demand": The Shock Erupts from Asia