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

Cailian Press, March 2 (Editor: Xiaoxiang) As the weekend attacks by the US and Israel on Iran triggered conflicts across the Middle East, international oil prices surged approximately 8% early Monday morning. According to Morgan Stanley analysts, the current lifeline of global oil may be approaching a “suffocation” countdown—if the escalating conflict results in the Strait of Hormuz being effectively closed for more than 25 days, major Middle Eastern oil producers may be forced to halt production.

Morgan Stanley 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 US and Israel launched attacks on Iran, which responded with a wave of missile strikes targeting countries including Qatar, the UAE, Kuwait, and Bahrain. US President Trump has stated that US 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 maritime monitoring systems show that ships around the Strait are generally stationary, with many vessels halting navigation for safety.

The Strait of Hormuz connects the Persian Gulf and the Oman Gulf, serving as a vital route for crude 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.

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

Morgan Stanley analysts made the following calculations:

The seven Gulf oil-producing countries (including Iraq, Kuwait, Qatar, Oman, and Iran) collectively have about 34.3 million barrels of available onshore crude oil storage capacity, enough to hold roughly 22 days of unexported production.

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

According to Morgan Stanley estimates, as of February 28, crude oil exports along 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 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 remains interrupted, the market’s theoretical “safety cushion” will physically fail.

Goldman Sachs also stated in a research report released Sunday 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 utilized, a month-long closure would still raise the fair value by $12 per barrel.