JP Morgan analysts have warned that the ongoing closure of the Strait of Hormuz could significantly reduce crude oil supplies from Iraq and Kuwait within days.
Analysts, as cited by Reuters, predicted that the ongoing Middle East conflict could lead to a cut of 3.3 million barrels per day (bpd) by the eighth day if the Strait of Hormuz continues to be inaccessible.
The Strait, a vital passage connecting the Persian Gulf to the Gulf of Oman, handles about 20% of global oil and liquefied natural gas shipments.
Iraq and Kuwait, countries heavily reliant on this route for their crude exports, could face a halt in operations within approximately three to 14 days, respectively. In the event of a prolonged closure, the losses could escalate to 3.8 million bpd around day 15 and 4.7 million bpd by day 18, JP Morgan further noted.
Two Iraqi oil officials told the publication that Iraq would be compelled to reduce its oil production by over 3 million bpd in the coming days if oil tankers cannot navigate freely through the Strait of Hormuz to reach loading ports.
Strait of Hormuz Closure Sends Oil Up
The Strait of Hormuz was declared closed by Iran on Monday, sparking global supply fears and causing oil prices to climb. When last checked, the WTI Crude futures were trading 2.71% higher at $76.50 per barrel. Iran also warned that any vessel attempting to pass would be attacked or set on fire.
Secretary of State Marco Rubio indicated that the Trump administration had anticipated a surge in oil prices due to the conflict and had a plan in place to alleviate the impact. He stated that the plan would be implemented by Energy Secretary Chris Wright and Treasury Secretary Scott Bessent.
Meanwhile, President Donald Trump, on Tuesday, ordered the U.S. Development Finance Corporation to provide political risk insurance and financial guarantees for all maritime trade transiting the Strait of Hormuz, sparking a relief rally in the markets.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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