Western Markets Face Impending Energy Shortages

Western economies are preparing for oil and gas supply shocks that have primarily affected Asia since the US-Iran conflict began, according to Gunvor CEO Gary Pedersen. Speaking at the Financial Times Commodities Global Summit, Pedersen highlighted that global crude storage levels have been severely depleted by governments and players to compensate for the supply gap caused by the effective closure of the Strait of Hormuz to shipping, through which one-fifth of global oil flows. He noted a 900 million barrel drop in global market storage since the Iran war started, emphasizing that the entire supply chain has been disrupted and markets must find a way to balance.

Supply Shortage Expanding to the West

The physical shortage of oil and gas, deeply felt in Asia since the conflict began, will widen its scope to Western markets in the coming months. As European and American markets enter summer, with increased travel, fuel consumption, and industrial activity like construction, local markets will increasingly feel supply stress on prices and availability. Pedersen stated, "We’ll see this tightness translating from the east to the West."

Volatility and Profit for Gunvor

The conflict-driven volatility has kept Gunvor busy, with Pedersen indicating the trading house made a profit in the first quarter of 2026 that matched the entire 2025 result, reported at $1.63 billion gross profit.

Structural Weaknesses Exposed

The strain on inventories reveals structural weaknesses that predate the conflict. Storage was already drawn down in 2022 after Russia's invasion of Ukraine, leaving limited buffer when Strait of Hormuz supply was disrupted. Pedersen noted that supply chains were already stretched, with longer shipping routes, high tanker market utilization, and a global shift from just-in-time inventories to precautionary stockpiling. He described the supply chain as "longer, more expensive and requires a lot more solvers."

Need for Refining Capacity Rebuilding

One consequence of the current crisis, which has seen fuel product prices soar, is a renewed emphasis on rebuilding refining capacity in Western markets. After years of closures in Europe and the US left these regions more exposed to shocks, Pedersen stated, "We’ve shut down so much refining capacity in the West. We’re going to need this capacity back."

Long-Term Volatility Expected

Longer-term volatility is likely to continue beyond the current crisis, as geopolitics, bilateral trade deals, and repeated disruptions push markets away from the integrated, low-buffer system of the past. Pedersen concluded, "When you shut down that much energy through a supply chain for this long, the ramifications are real."