According to HFI Research, an investment firm specializing in energy markets, the oil market is approaching a critical turning point by early June 2026, with potential for 'real panic' as oil inventories run out. The firm warns that if the Strait of Hormuz remains closed through the first week of June, oil markets will likely descend into panic-buying and hoarding as nations around the world exhaust their oil reserves. This scenario represents a significant escalation from current market conditions, where Brent crude has remained solidly above $100 per barrel for most of the past month, demonstrating the scale of supply disruptions in the Middle East. The International Energy Agency has recently warned that energy markets could enter the 'red zone' by July and August as supplies dwindle, adding urgency to HFI's warning about the approaching crisis point.
The US strategic oil reserves are rapidly declining, with HFI Research predicting the US would deplete its oil stocks within 8 weeks in late April, implying exhaustion by the end of June. According to the latest data from the Energy Information Agency, the US had 1.6 billion barrels of oil and petroleum products in its stocks the week ending May 8, representing a 67 million barrel decline from levels at the start of April. This depletion timeline aligns with HFI's warning that nations drawing down their excess crude stores could trigger market panic by early June, as markets have been shielded from greater pain by these strategic reserves. The International Energy Agency has identified this depletion as one of the biggest challenges facing global energy markets, with the agency noting that tax refunds helped alleviate some of the pain caused by higher energy prices, but that may not be the case now.
According to a research report by Citi, global oil markets are severely under-pricing supply duration and tail risks, with Brent crude prices poised to surge to $120 per barrel in the near term and potentially touch $150 per barrel under a bull case scenario. The report states that the primary driver behind this projected price spike remains the ongoing war and the closure of the Strait of Hormuz, with risks surrounding price forecasts skewed to the upside. HFI Research has previously speculated that crude prices rising past $150 a barrel was possible, noting that the barrels lost all but guarantee a higher oil price setup. Latest market developments show Brent crude futures for July and US West Texas Intermediate futures for June advanced around 2% in early Asia trading, resuming their rally after three straight sessions of declines as investors weighed mixed messaging on Iran peace deal negotiations. The International Energy Agency has identified the Iran war and the continued closure of Strait of Hormuz as posing one of the biggest challenges to the global energy market.
The report outlines that a formal memorandum of understanding or de-escalation is unlikely to materialise before July, with the timing and pace of the reopening of the Strait of Hormuz depending largely on the Iranian regime. The latest round of peace talks was clouded by uncertainty as Iran struck a stubborn stand on keeping the enriched uranium within the country, creating additional barriers to a swift resolution. The Iranian regime is increasingly likely to disrupt SoH flows for some time, as keeping the strategic waterway closed allows Iran to maximise deterrence against future attacks and maximise the present value of future oil revenues due to convex price-to-inventory dynamics. HFI Research warns that if the Strait of Hormuz remains closed through the first week of June, oil markets will likely descend into panic-buying and hoarding, creating a vicious cycle where extreme supply shortages spark further panic-buying and hoarding behavior.
Indian markets closed higher on Friday with Nifty 50 settling at 23,719.30 points up 0.3% and Sensex ending over 0.3% higher at 75,415.35 points, supported by positive global cues and easing crude oil prices. The market tone remains range-bound with 23500 acting as immediate support and 23800 as the first hurdle. A breakout would require two catalysts: durable de-escalation in West Asia and Brent stabilizing below $85. HFI Research notes that sellside analysts are still assuming some return to normality by June to avoid tank bottom, but the math is what it is, suggesting that current optimistic forecasts may be influenced by psychological biases rather than fundamental market analysis. The market is currently in a buy-on-dips and sell-on-rallies pattern, with sustained uptrend requiring geopolitical stability and softer oil prices.
