Half a century after it was created, the US strategic petroleum reserve is once again doing the job it was built for. The war that began in late February 2026, when the United States and Israel launched strikes on Iran and Tehran answered by shutting the Strait of Hormuz, has produced what analysts describe as the largest oil supply disruption on record. With tankers stranded and Gulf exports throttled, governments have turned to the barrels they stored for exactly this kind of emergency.
The episode has revived an old question with new urgency: how much protection do emergency stockpiles really provide, who holds them, and what happens when they need to be refilled at high prices?
From the 1973 Embargo to a Strategic Petroleum Reserve
The modern idea of state-held oil stocks grew out of the 1973 crisis, when Arab members of OPEC cut off crude shipments to the United States over its support for Israel during the Yom Kippur War. The resulting shortages fed the stagflation that defined much of the decade. President Gerald Ford responded by signing the Energy Policy and Conservation Act in December 1975, which established the reserve as a buffer against future supply shocks and as part of a wider push for energy independence.
Washington stored the oil in salt caverns along the Texas and Louisiana Gulf Coast, building capacity of roughly 727 million barrels. The reserve came close to that ceiling in December 2009, but had fallen to about 415 million barrels by early 2026. Over its lifetime, the US has spent around $25.7bn on the programme, with the bulk going on crude purchases rather than facilities.
The purpose of stockpiles has also shifted over time. What began as a tool for self-sufficiency is now used mainly to smooth supply, cap price spikes and help contain inflation. For some governments, reserves have also become a quiet instrument of geopolitical leverage.
Why Hormuz Matters So Much
The narrow channel between Iran and Oman is the single most important chokepoint in the global energy system. In 2025 roughly 20 million barrels a day of crude and refined products moved through it, equal to about a fifth of world consumption. Around a third of all seaborne crude trade passed through the strait, much of it headed to China and India. Saudi Arabia, Iraq, Kuwait, the UAE, Qatar, Bahrain and Iran all depend on the route, and Qatar and the UAE rely on it almost entirely for liquefied natural gas exports.
When flows collapsed by as much as 97 percent in the first weeks of the conflict, some 2,000 tankers were affected. Oil had averaged about $65 a barrel before the war; by the end of April it had risen above $120, its highest level since 2022. Some analysts warn that a closure lasting several more months could push prices beyond $150. Saudi Arabia, traditionally the market’s swing producer, has been unable to offset the shortfall because of the closure.
The Largest Coordinated Release in IEA History
About two weeks into the war, the 32 members of the International Energy Agency agreed to release 400 million barrels from emergency stocks, the biggest coordinated drawdown since the system was set up in 1974. That dwarfs earlier interventions such as the 60 million barrels released during the 2011 Libyan conflict and the 180 million barrels released across two actions after Russia invaded Ukraine in 2022.
The United States pledged 172 million barrels, much of it lent to companies on an exchange basis, meaning the oil must be returned later. Japan committed 36 million barrels and the UK 13 million. Prices fell sharply after the announcement, and many energy economists argue they would have climbed much higher without it. As detailed in World Finance’s special report on emergency oil stocks, the release bought time rather than solving the underlying problem.
Scale explains why. The world consumes about 100 million barrels a day, so even a record release covers only a few days of global demand. Stockpiles can soften a shock and calm panic buying, but they cannot replace a sustained loss of Gulf supply.
Who Holds the World’s Emergency Barrels
At the end of 2025, global emergency holdings were estimated at around 2.5 billion barrels. China is believed to hold the largest share, about 1.4 billion barrels according to US government estimates, although Beijing does not publish official figures. The US strategic petroleum reserve ranks second at roughly 413 million barrels, followed by Japan with about 263 million. Europe, South Korea, Saudi Arabia, Iran, the UAE and India hold smaller volumes.
China’s build-up stands out. As the world’s largest crude importer, it has steadily expanded storage in recent years, and some observers link the effort to military planning and the risk of a confrontation over Taiwan.
The Economic Fallout Beyond Oil
The shock has already damaged the global outlook. Before the conflict, the IMF expected world growth of about 3.4 percent this year. Its adverse scenario now points to growth of 2.5 percent with inflation of 5.4 percent, while a severe scenario, in which energy disruption extends into next year, implies growth of about 2 percent and inflation above 6 percent. World Bank chief economist Indermit Gill has described the effects arriving in waves: first energy, then food, then broader inflation, followed by higher interest rates and more expensive debt.
Governments have scrambled to cushion households. By the end of April around 40 countries had cut fuel taxes, and some declared emergencies, encouraged remote work or closed schools to save energy. Kenya, for example, halved VAT on fuel after petrol hit a record price, accepting a significant loss of revenue. Import-dependent economies such as India, which buys most of its oil abroad, have seen inflation edge higher, though so far within central bank targets. Politically, the strain is visible within OPEC itself: the UAE announced it would leave the group to pursue its own production path.
The Cost of Refilling the Tanks
Once the immediate crisis passes, governments face an awkward bill. Replenishing stocks bought at modest prices with oil purchased near $100 or more is expensive, and the burden falls hardest on net importers with stretched public finances. Exchange agreements help, but only cover part of what has been drawn down.
There is also a policy debate about the right size of reserves in an era of more frequent geopolitical shocks. Holding oil is costly, yet the 2026 crisis suggests that countries with thin buffers are far more exposed to sudden price spikes and the inflation that follows.
Conclusion
The Hormuz closure has shown that the strategic petroleum reserve and its counterparts abroad remain one of the few tools governments can deploy quickly when supply vanishes. They are not a cure for a prolonged outage, and refilling them will be costly. But in a world where uncertainty is becoming the norm, the race to build and maintain emergency stocks is likely to intensify, turning the last barrel in storage into a strategic asset in its own right.
