The threat of a blockade in the Strait of Hormuz is rapidly transforming into a physical supply crisis at a pace far exceeding previous expectations.
Natasha Kaneva, Chief Commodity Strategist at JP Morgan, pointed out in a recent report that due to the uneven storage capacity of oil-producing countries in the Middle East, the process of forced production cuts will significantly accelerate over the next three days—by then, the cumulative production cut will approach 3.3 million barrels per day, far exceeding the market's previous plans.
JP Morgan's latest estimates show that Iraq's storage capacity is about to run out in two days, while Kuwait has about 13 days left, and once they reach capacity, they will face forced production cuts. It is noteworthy that these estimates are relatively conservative and do not account for some product storage points in the Persian Gulf and available empty large oil tankers.
If the blockade continues, JP Morgan predicts that by the 8th day (approximately three days from now), the scale of forced production cuts will reach about 3.3 million barrels per day, rising to 3.8 million barrels per day by the 15th day, and further expanding to 4.7 million barrels per day by the 18th day, with these figures covering only crude oil and excluding refined oil.
Brent crude prices were pushed up to around $85 per barrel on Tuesday, following an explosion and oil spill from a tanker near the coast of Kuwait, further tightening market sentiment.
<h2>The Threat of Storage Capacity Reaching Capacity: From &#34;25 Days&#34; to &#34;3 Days&#34; Warning Upgrade</h2>
Earlier this week, JP Morgan estimated, based on the initial data of a sharp decline in transit volumes through the strait, that Middle Eastern oil-producing countries had about a 25-day buffer window, which was seen by the market as a key risk reference indicator. However, subsequent verification of each country's actual storage capacity rendered this conclusion quickly obsolete.
JP Morgan stated that Iraq's situation is particularly urgent. The country has cumulatively reduced production by about 1.5 million barrels per day, covering the world's second-largest oil field, Rumaila (with a reduction of about 700,000 barrels per day), West Qurna 2 (with a reduction of about 460,000 barrels per day), and the Missan oil field (with a reduction of about 325,000 barrels per day).
Saudi Arabia is also under pressure. As of March 1, the remaining storage space at the Ju'aymah terminal on the eastern coast of Saudi Arabia has rapidly narrowed, with four out of six tanks at the Ras Tanura refinery already full, and the refinery had just been attacked by Iran earlier this week, leading to a shutdown.
The core issue lies in the severe inequality of storage capacity. Some countries have ample storage facilities, while others have almost no capacity left, thus the overall average of 25 days masks the more urgent pressures faced by individual countries.
Antoine Halff, co-founder and chief analyst of the geopolitical analysis firm Kayrros, pointed out, &#34;Not all storage capacities are equally important; certain tanks are critical due to their location relative to oil fields or loading facilities, and the storage facilities are not interconnected, leading to significant efficiency losses within the system.&#34;
<h2>Transportation Disruptions Continue, Infrastructure Faces New Shocks</h2>
Traffic through the strait is still nearly at a standstill. Aside from Iranian vessels, there have been no confirmed records of oil tankers completing transit in and out of the strait, although some ships are suspected of passing through while turning off their transponders—reportedly, a Suez-max tanker &#34;Pola,&#34; carrying about 1 million barrels, entered the strait at 2 AM local time and then turned off its vessel signal. Currently, only 6 to 12 very large crude carriers (VLCCs) are available for booking, and there is very limited space for offshore storage capacity allocation
At the same time, the energy infrastructure in the Middle East continues to be under attack. A fire broke out at the Port of Fujairah in the UAE after intercepting a drone, which is home to multiple refining and storage facilities. Bloomberg commodity analysts warn that if any fully loaded oil tanker in the Persian Gulf is attacked, even with the risk of oil spills, it may force oil-producing countries to proactively halt loading, significantly advancing the process of forced production cuts.
<h2>East-West Pipeline Provides Limited Buffer, Trump Administration May Intervene to Ensure Passage</h2>
Amid the deteriorating situation, some signs of relief are beginning to emerge. According to Bloomberg, Saudi Arabia is working to reactivate the East-West pipeline, rerouting crude oil to bypass the Strait of Hormuz and export through the Red Sea. Saudi Aramco data shows that the pipeline is designed to have a transportation capacity of about 7 million barrels per day, with actual usage before the outbreak of conflict being less than half, theoretically still having an additional transportation potential of about 5 million barrels per day, and the four main berths at Yanbu Port have the corresponding loading capacity.
However, analysts generally believe that even if the pipeline operates at full capacity, it will still be difficult to effectively compensate for the supply gap caused by a substantial blockade of Hormuz.
At the same time, there is a possibility of intervention by the Trump administration—plans include providing naval escorts for transiting vessels and accompanying government-backed war insurance to simultaneously reduce both the physical and financial risks of passage. However, logistical obstacles still exist. JP Morgan's analysis emphasizes that speed and decisiveness are crucial— as tank capacity continues to tighten, any delay will quickly translate into irreversible forced production cuts.

JP Morgan's latest calculations show that due to the severe imbalance in storage capacity among Middle Eastern oil-producing countries, the forced production cut warning window has sharply decreased from "25 days" to "3 days," with the cumulative production cut scale on the 8th day approaching 3.3 million barrels per day. Iraq's reserves are in urgent need after two days, and four key storage tanks in Saudi Arabia are already at full capacity

- The threat of a blockade in the Strait of Hormuz is rapidly escalating into a physical supply crisis, according to a report from JPMorgan.  
- With oil storage capacities in the Middle East varying significantly, the forced production cuts could reach about 3.3 million barrels per day within three days, impacting diverse oilfields in Iraq and causing Brent crude prices to surge to around $85 per barrel.  
- Amid ongoing transportation disruptions and threats to energy infrastructure, options for bypassing the Strait are limited, and decisions must be swift to avoid irreversible production halts.

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The Strait of Hormuz will be closed for another 3 days, forcing 3.3 million barrels of crude oil to be shut down in the Middle East, with Iraq being the hardest hit!