Oil producers in the Middle East face significant constraints if the Strait of Hormuz remains closed due to ongoing regional conflict. Analysts from JPMorgan Chase & Co. estimate that most producers could only sustain output for approximately 25 days under a complete shutdown. This timeframe is dictated by the available storage capacity, after which mandatory production shut-ins would become unavoidable. The Strait of Hormuz, a critical chokepoint, typically sees around 19 million barrels a day of liquid fuel exports, including 16 million barrels of crude. It is a major route for oil and liquefied natural gas.
Recent events, including reported attacks and retaliatory missile barrages, have already impacted tanker traffic through the Strait. JPMorgan noted that export flows on February 28 fell to about 4 million barrels, consisting almost entirely of Iranian crude. This figure is significantly lower than the typical daily rate, which is about four times greater. Shipowners have largely paused activity in the region, though the Strait has not been formally closed.
The seven Gulf producers, including Saudi Arabia, the UAE, Iraq, Kuwait, Qatar, Oman, and Iran, possess roughly 343 million barrels of available onshore crude storage capacity, according to JPMorgan’s estimates. This is equivalent to approximately 22 days of production that could be stored. While some nations, like Saudi Arabia and the UAE, have the ability to divert some oil via pipeline to alternative sea routes, these volumes are limited.
Additional storage options at sea could provide a marginal buffer. JPMorgan suggests about 60 empty tankers in the Gulf region could absorb around 50 million barrels, potentially extending operations by another three to four days. JPMorgan Chase & Co. is a global financial services firm that provides investment banking, asset management, and other financial services. It provides insights and analysis of energy markets.