Oil market "Doomsday Clock"! If the Strait of Hormuz closes for 25 days, Middle Eastern oil-producing countries will be forced to halt production?

As the weekend attacks by Israel and the U.S. on Iran sparked fighting across the Middle East, international oil prices surged by about 8% early Monday morning. According to analysts at JPMorgan Chase, the current lifeline of global oil may be approaching a “suffocation” countdown—if the escalating conflict results in the actual closure of the Strait of Hormuz for more than 25 days, major Middle Eastern oil producers could be forced to halt production.

JPMorgan analysts, including Natasha Kaneva, wrote in a report, “Beyond this point, the limitations of oil storage capacity will force production into forced shutdowns.”

Last weekend, the U.S. and Israel launched strikes against Iran, which responded with a wave of missile attacks targeting countries including Qatar, the UAE, Kuwait, and Bahrain. U.S. President Trump has stated that U.S. forces will continue bombing Iran until their objectives are achieved.

Currently, oil tanker traffic through the Strait of Hormuz has almost come to a halt. Real-time data from international oil tanker monitoring systems show that vessel speeds in the waters surrounding the Strait have generally dropped to zero, with many ships halting to avoid risks.

The Strait of Hormuz connects the Persian Gulf and the Gulf of Oman and is a vital route for oil exports from Middle Eastern producers such as Saudi Arabia, Iraq, Qatar, and the UAE. About one-fifth of global oil transportation passes through this strait.

JPMorgan analysts noted in their report that approximately 19 million barrels of liquid fuels (including 16 million barrels of crude oil) are typically exported daily through the strait. They pointed out that while countries like Saudi Arabia and the UAE can transport some oil via pipelines to alternative maritime routes, the total volume is limited.

The analysts made a calculation:

The seven Gulf countries (including Iraq, Kuwait, Qatar, Oman, and Iran) have a combined onshore crude oil storage capacity of about 343 million barrels, enough to store roughly 22 days of unexported production.

Additionally, offshore storage facilities can provide extra buffer space, but not much—currently, about 60 idle oil tankers in the Gulf region can store around 50 million barrels of crude oil, extending operational capacity by three to four days.

According to JPMorgan estimates, as of February 28, crude oil exports on this route had fallen to about 4 million barrels, almost all Iranian oil, whereas typical daily exports are about four times that amount.

Notably, on March 1, eight OPEC+ members, including Saudi Arabia and Russia, held a video conference. Given the stable global economic outlook and low inventory levels, the countries decided to implement a daily production increase of 206,000 barrels starting April 2026, higher than the previous industry estimate of 137,000 barrels per day.

However, the issue remains that these production capacities heavily depend on exports through the Strait of Hormuz. If the strait’s transportation continues to be interrupted, the market’s theoretical “safety cushion” will physically fail.

Goldman Sachs also stated in a Sunday research report that, without other offset measures (such as utilizing backup pipeline flows or releasing strategic petroleum reserves), a full month of closure of the Strait of Hormuz would increase the fair value of crude oil by $15 per barrel. Even if all estimated backup pipeline flows of 4 million barrels per day are used, a month-long closure would still raise the fair value by $12 per barrel.

(Source: Cailian Press)