JP Morgan: If the Strait of Hormuz is closed for more than 25 days, major oil-producing countries in the Middle East will be forced to halt production.

With the increasing security risks in the Middle East, the key oil and liquefied natural gas (LNG) transportation route of the Strait of Hormuz has been cut off. In response, analysts at J.P. Morgan stated that if the conflict escalates and the Strait of Hormuz is actually closed for more than 25 days, the major oil-producing countries in the Middle East may be forced to suspend oil production. J.P. Morgan estimates that the onshore oil storage capacity of the seven Gulf oil-producing countries, including Iraq, Kuwait, Qatar, Oman, and Iran, is about 343 million barrels, which is equivalent to being able to store the stranded oil production due to transportation disruptions for 22 days. In addition, offshore storage can provide additional cushion - there are about 60 empty oil tankers in the Gulf region that can store about 50 million barrels of oil, equivalent to three to four days of oil production capacity of the oil-producing countries in the region. Analysts at J.P. Morgan, including Natasha Kaneva, pointed out: "Once this time limit is exceeded, storage capacity constraints will force the major oil-producing countries in the Middle East to shut down oil production." Following the military strikes by the United States and Israel against Iran on February 28, Iran announced the closure of the Strait of Hormuz, and multiple tanker owners and traders have suspended the transportation of oil, fuel, and LNG through this strait. According to data from the International Tanker Traffic Monitoring System, the sailing speed of tankers in the waters around the Strait of Hormuz had generally dropped to zero, indicating that shipping in the region had come to a standstill. Meanwhile, several European governments have issued emergency instructions to their oil tankers flying their national flags, requiring them to strictly prohibit passage through the Strait of Hormuz to avoid the security risks posed by the current escalation of the situation. In addition, insurance companies have notified multiple tanker owners that they will cancel insurance policies for vessels passing through the Persian Gulf and the Strait of Hormuz and increase insurance premiums. The Strait of Hormuz is the most important chokepoint for oil transportation in the Middle East and ranks first among the world's recognized eight major oil sea lanes. By 2025, the volume of oil transported through the Strait of Hormuz exceeds 20 million barrels per day, accounting for about 26.6% of the total global seaborne oil trade volume. Economist Jorge Leon of Rystad Energy, an energy research firm, analyzed that even with alternative routes such as Saudi Arabia's East-West Pipeline and the infrastructure of the United Arab Emirates, the full closure of the Strait of Hormuz could still lead to a global daily reduction of 8 to 10 million barrels of oil supply. Oil prices may surpass $100 For the global oil market, the key issue is whether the tension in the Middle East will escalate into a long-term interruption of oil exports in the Gulf region. Saul Kavonic, head of energy research at MST Marquee, said preliminary signs indicate that this is a larger-scale attack on Iran, accompanied by retaliation, which could involve multiple Gulf countries. The market will initially account for a series of risks - from Iran losing up to 2 million barrels of daily exports, to attacks on regional infrastructure, and even the extreme scenario of a complete closure of the Strait of Hormuz. He said: "This could be three times as serious as the Arab oil embargo of the 1970s, and international oil prices may soar to three digits." Industry analysts suggest that in the event of Iran cutting off the Strait of Hormuz, global crude oil international trade could face interruptions of about 20 million barrels per day of crude oil and 300 million cubic meters per day of LNG, accounting for more than 20% of the total global crude oil and LNG international trade volume. The impact of the supply disruptions, first of all, is the panic affecting the supply interruption, followed by the actual impact of the supply interruption after the panic, which will directly and quickly reflect changes in international crude oil prices. A rapid rise in international crude oil prices is a high probability event. If combined with the support of the peak demand season, international crude oil prices are expected to hit $100 per barrel. As of the time of writing, Brent crude futures prices surged nearly 8% to $78.54 per barrel, briefly soaring 13% earlier on Monday. On March 1 local time, a tanker attempting to pass through the Strait of Hormuz was hit. Bob McNally, analyst from Rapidan Energy, said Iran may attempt to retaliate against US President Trump by disrupting commercial navigation safety in the Strait of Hormuz, which could push oil prices to over $100 per barrel. The market has not realized that Tehran has many naval mines and short-range missiles, which could severely disrupt traffic. Helima Croft, an analyst at Canadian Imperial Bank of Commerce, revealed that regional leaders have warned the United States that a war involving Iran could push oil prices above $100 per barrel. Predictions from analysts at Dutch bank Rabobank are more restrained, suggesting that oil prices may remain above $90 per barrel in the short term. Major oil-producing countries announce production increase in April OPEC issued a statement on March 1 saying that eight major oil-producing countries have decided to increase production by an average of 206,000 barrels per day in April. Representatives from Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman held an online meeting on the day to discuss the international oil market situation and prospects. The increase in production was not unexpected, but the magnitude of the production increase was larger than previously expected. With tensions between the US and Iran pushing up oil prices and the summer demand peak approaching, the market had previously expected OPEC+ to consider increasing oil production by 137,000 barrels per day in April. The conflict in the Middle East directly led to the increase in production of major oil-producing countries. Given the current stable global economic expectations and low oil inventories, the eight major oil-producing countries mentioned above decided to adjust production levels. To maintain stability in the oil market, these major oil-producing countries will flexibly adjust the pace of production increases according to market conditions. In April 2023, the eight major oil-producing countries announced voluntary production cuts of about 1.65 million barrels per day, and in November 2023 announced an additional voluntary production cut of 2.2 million barrels per day. These two major production cuts have been extended several times. However, during this period, oil production in countries like the United States and Canada increased. In March 2025, the eight major oil-producing countries decided to gradually increase oil production starting from April 1 of the same year and continue to increase production monthly until December of that year, then announced a temporary suspension of production increases from January to March 2026 due to seasonal factors. LNG trade faces risks In addition to crude oil, liquefied natural gas (LNG) trade may also face risks due to the interruption of the Strait of Hormuz. The core risk of this conflict to the international gas market is the second largest LNG exporter in the world, Qatar. Nearly 20% of the global LNG supply comes from Qatar, and its exports must pass through the Strait of Hormuz. Market analysts said: "Once the Strait of Hormuz is blocked, nearly 100 million tons of LNG trade per year will face interruption risks, which is enough to reverse the expected oversupply in the global LNG market after 2027." According to an analysis by Goldman Sachs, if shipping through the Strait of Hormuz stalls for a month, European gas prices could more than double. Analysts at Goldman Sachs stated in a report on March 1 that European and Asian gas benchmark prices have yet to fully digest the risks associated with Iran. They pointed out that about one-fifth of the world's LNG (mostly from Qatar) needs to pass through the key bottleneck of the Strait of Hormuz. If the shutdown lasts a month, European prices and Asian spot prices for LNG could soar 130% to $25 per million British thermal units (mmBtu). Analysts further stated: "Assuming that the interruption of natural gas supply transportation through the Strait of Hormuz lasts longer, exceeding two months, it may push European gas prices above 100 euros per megawatt-hour (MWh), which is equivalent to $35 per mmBtu, triggering more severe disruptions in global gas demand."