Hormuz closes again for 3 days, and 3.3 million barrels of crude oil in the Middle East will be forced to halt production, with Iraq bearing the brunt!

The threat of the Strait of Hormuz blockade is rapidly turning into a tangible supply crisis at a pace far exceeding previous expectations.

JPMorgan Chase Chief Commodity Strategist Natasha Kaneva stated in a recent report that due to uneven storage capacities among Middle Eastern oil-producing countries, the process of forced oil production cuts will accelerate significantly over the next three days—by then, total shutdowns will approach 3.3 million barrels per day, far surpassing market estimates.

JPMorgan’s latest estimates show Iraq’s storage capacity remaining for about two days, Kuwait about 13 days. Once these limits are reached, forced production cuts will be inevitable. Notably, these estimates are conservative and do not include some storage points within the Persian Gulf or the available capacity of large idle tankers.

If the blockade persists, JPMorgan predicts that by Day 8 (about three days from now), forced shutdowns could reach approximately 3.3 million barrels per day; by Day 15, this could rise to 3.8 million barrels per day; and by Day 18, further increase to 4.7 million barrels per day. These figures only account for crude oil, excluding refined products.

Brent crude oil prices have already been pushed near $85 per barrel on Tuesday, amid an explosion and oil spill caused by a tanker near the Kuwaiti coast, further tightening market sentiment.

Storage Capacity Threat: From “25 days” to “3 days” Warning Levels

Earlier this week, JPMorgan estimated that based on initial data showing a sharp decline in Strait transit volumes, Middle Eastern oil producers had about a 25-day buffer window. This estimate was considered a key risk indicator by the market. However, subsequent detailed checks of actual storage capacities in various countries quickly invalidated this conclusion.

JPMorgan emphasized that Iraq’s situation is especially urgent. The country has already cut approximately 1.5 million barrels per day, including the second-largest global oil field Rumaila (about 700,000 barrels/day reduction), West Qurna-2 (about 460,000 barrels/day), and Maysan oil field (about 325,000 barrels/day).

Saudi Arabia is also under pressure. As of March 1, the remaining storage space at the Jeddah terminal on the Eastern coast has rapidly diminished, with four out of six tanks at the Ras Tanura refinery now full. The refinery was previously shut down earlier this week after an attack by Iran.

The core issue is the severe imbalance in storage capacity. Some countries have ample facilities, while others have almost no remaining capacity. The overall 25-day average masks the more urgent pressures faced by individual nations.

Antoine Halff, co-founder and chief analyst at geostrategic firm Kayrros, pointed out, “Not all storage capacities are equally important. Some tanks are critical due to their location relative to oil fields or loading facilities. Storage facilities are not interconnected, leading to significant efficiency losses within the system.”

Ongoing Transportation Disruptions and Infrastructure Attacks

Strait transit remains near a standstill. Aside from Iranian vessels, there are no confirmed reports of oil tankers passing through the Strait, although some ships are suspected to be transiting with transponders turned off. Reports indicate that a ballast Suezmax tanker, “Pola,” with about 1 million barrels of capacity, entered the Strait early this morning and immediately turned off its signals. Currently, only 6 to 12 VLCCs (Very Large Crude Carriers) are available for booking, with very limited space for storage and deployment.

Meanwhile, Middle Eastern energy infrastructure continues to face attacks. The port of Fujairah in the UAE experienced a fire after intercepting a drone. This port hosts multiple refining and storage facilities. Bloomberg commodity analysts warn that any attack on fully laden oil tankers in the Persian Gulf could force producers to halt loading, even with spill risks, potentially accelerating forced production cuts.

Limited Buffer from East-West Pipelines; Possible US Intervention to Ensure Transit

Signs of some relief are emerging amid the worsening situation. According to Bloomberg, Saudi Arabia is working to restart the East-West pipeline, rerouting crude exports around the Strait of Hormuz through the Red Sea. Saudi Aramco reports that the pipeline’s designed capacity is about 7 million barrels per day, with less than half currently utilized before the conflict erupted. There is still potential to increase capacity by approximately 5 million barrels per day, with four major berths at Yanbu capable of loading.

However, analysts generally agree that even full operation of the pipeline would be insufficient to fully compensate for the supply gap caused by a real blockade of the Strait.

Meanwhile, the US government may intervene—options include providing naval escort for transit ships and government-backed war insurance to reduce both physical and financial risks. Yet logistical challenges remain. JPMorgan emphasizes that speed and decisiveness are critical—any delays as storage capacity tightens will quickly turn into irreversible forced shutdowns.

Risk Warnings and Disclaimers

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