Why the Strait of Hormuz Reopening Could Break OPEC's Grip on the Oil Market

South America has permanently hijacked market share

While the Strait of Hormuz was closed, the global oil trade rewired itself. The most significant shift is the emergence of South America as a new powerhouse, a change that is likely permanent given the long-term contracts and logistics now in place.

Through May 2026, South America's total oil exports surged, adding 155 million barrels of new exports and making the region the largest source of new global oil supply this year, surpassing even the United States . This surge is led by deepwater production in Brazil and Guyana and a recovering oil sector in Venezuela. The U.S. Energy Information Administration has projected that Brazil, Guyana, and Argentina alone will account for half of all global production growth in 2026 .

For Asian importers, the biggest customers for Gulf crude, the crisis forced a scramble for reliable alternatives. Months of building deep trading relationships with non-Middle Eastern suppliers mean that returning Gulf barrels will not automatically reclaim their old market share. Instead, they will face entrenched competition and may need to be sold at a discount .

OPEC is fracturing from the inside

OPEC's internal problems have compounded its external challenges. The UAE's formal departure from the cartel has been interpreted by analysts not just as a loss of one member’s production, but as a "structural fracture of the cartel's pricing power" that could signal an unraveling of quota discipline if other members follow suit .

At the same time, the group's production has collapsed to the lowest level in at least two decades. A Reuters survey found that OPEC's output fell to just 16.13 million barrels per day in May, a figure driven down by the U.S. naval blockade on Iran and the de facto closure of the Strait for other Gulf nations . Excluding the UAE, which left the group on May 1, this is a historically weak base from which to try and reassert market dominance .

OPEC+ has also tied its own hands. The group agreed to a largely symbolic quota increase of 188,000 barrels per day for July, a move that is conditional on the Strait reopening and represents a fraction of the supply that is expected to flood back . This decision acknowledges that the group lacks the practical ability to manage the market through a fixed calendar and is instead reacting to geopolitical events beyond its control.

Further weakening the case for a coordinated OPEC response is softening demand. The group has trimmed its own 2026 demand growth forecast to 970,000 barrels per day, making the task of absorbing millions of returning barrels even more difficult.

A battle for survival, not market management

The Brookings Institution’s assessment that the crisis has fundamentally altered market dynamics aligns with the overwhelming evidence. Their analysis notes that OPEC's oil production has fallen more than 30% during the conflict and that even once the strait is open, the market will take months to normalize—time in which the cartel's cohesion will be severely tested .

The core challenge for OPEC is that its members are not a unified bloc with shared goals but a collection of revenue-starved countries. As soon as the Strait reopens, the incentive for each country will be to maximize its own exports to recoup months of financial losses, not to hold back production to support prices for the collective good. Reuters analyst Ron Bousso warned that this dynamic "could leave Riyadh in an awkward position" as it struggles to convince members to rein in production .

The reopening of Hormuz does not restore OPEC's pre-crisis position. Instead, it creates a situation where Gulf producers, desperate to regain market share, will face a market that is already well-supplied, structurally oversupplied, and permanently less dependent on their crude. As analysts have warned, returning OPEC barrels alongside sustained high output from non-OPEC+ countries could push the market into a surplus of several million barrels a day , a combined effect pointing to a durable reduction in OPEC's pricing power.