The Market Has Faded the Hormuz War Premium — the Strait Is Still 90% Shut

Brent crude has slid to roughly $98 from its $126 March peak even as the Strait of Hormuz enters its 94th day choked to a tenth of normal traffic — the market is now pricing a reopening Tehran has not delivered. For globally exposed firms the asymmetry is stark: the war premium has deflated into a wager on diplomacy, leaving balance sheets thinly hedged against re-escalation.

What happened. The US–Israeli air war on Iran, live since 28 February, still throttles Hormuz — the artery for roughly a quarter of seaborne crude. Just ~10 ships transit daily versus a normal ~95, yet tankers are now massing outside the Gulf in a wager on resumption. Brent has round-tripped from $72 pre-war to a $126 peak and back to $98, shedding half its war premium. On 3 June the calm cracked: the S&P 500 snapped a nine-day winning streak (−0.74%) and the 10-year Treasury yield rose to 4.45% as renewed US–Iran tension lifted oil.

Why it matters. A reopening is priced but undelivered; Goldman Sachs warns another month of closure keeps Brent above $100 all year. Energy is the swing variable for the inflation path just as Kevin Warsh’s Fed convenes for the first time on 16–17 June — triple-digit oil reloads inflation, narrows the room to cut, and threatens wider credit spreads for energy-importing sovereigns.

China angle. China is Hormuz’s single largest customer — destination for 37.7% of the strait’s crude and reliant on it for 35–50% of imports. Yet the offshore yuan sits at a two-year high near 6.76 and Chinese firms have absorbed the blow: ~1.39 billion barrels in storage (≈120 days’ cover), 49 supplier countries, rising Russian pipeline flows — and, pointedly, more US crude. PetroChina now routes barely 10% of volume through Hormuz. Diversification, not luck.