Bloomberg: Regional oil output could stop after 25 days of Strait of Hormuz closure

Oil producers in the Middle East may be able to maintain production for “no more than 25 days” if the Strait of Hormuz were to be completely shut due to escalating conflict in the region, analysts from JPMorgan Chase & Co. have warned.

“Beyond this point, storage constraints would force mandatory production shut-ins,” the analysts, including Natasha Kaneva, said in a note seen by Bloomberg.

The warning comes amid a surge in tensions following US and Israeli attacks on Iran over the weekend, which were met with a retaliatory barrage of missiles targeting several countries, including Qatar, the United Arab Emirates, Kuwait, and Bahrain. US President Donald Trump has stated that American forces will continue bombing Iran until his objectives have been achieved.

Tanker traffic through the Strait of Hormuz — a critical chokepoint off Iran’s coast through which roughly a fifth of the world’s oil and liquefied natural gas passes — has effectively stalled due to a self-imposed pause by shipowners, though it has not been formally closed. Export flows via the route on February 28 fell to around 4 million barrels of almost entirely Iranian crude, compared with a typical daily rate of about four times that amount, JPMorgan said.

The bank noted that around 19 million barrels a day of liquid fuel exports, including 16 million barrels of crude, normally transit the strait. While countries such as Saudi Arabia and the UAE can redirect some oil via pipelines to alternative sea routes, volumes are limited, analysts said.

Across the seven Gulf producers — Saudi Arabia, the UAE, Iraq, Kuwait, Qatar, Oman, and Iran — JPMorgan estimates roughly 343 million barrels of available onshore crude storage capacity, equivalent to 22 days of stranded production.

Additional storage options at sea could provide a further buffer, with around 60 empty tankers in the Gulf region capable of absorbing about 50 million barrels — extending operations by another three to four days.

By Sabina Mammadli