Iraq and Kuwait face the prospect of severe export losses if the Strait of Hormuz remains closed, with J.P. Morgan warning that the disruption could force production shut-ins within days and remove as much as 4.7 million barrels a day from the market.
The bank said Iraqi crude exports could be affected within three days of a sustained closure, while Kuwait could begin to face similar constraints after about two weeks.
The warning comes as the Gulf energy system absorbs the effects of a widening military confrontation involving Iran, Israel and the United States. Iranian state media carried remarks from a representative of the Islamic Revolutionary Guard Corps declaring the waterway closed and warning that vessels attempting to pass could be attacked. The Strait of Hormuz is one of the world’s principal energy chokepoints, carrying roughly a fifth of global oil and liquefied natural gas flows.
J.P. Morgan’s estimate illustrates how quickly the crisis could move from shipping disruption to upstream production losses. By day eight of a closure, about 3.3 million barrels per day could be shut in; by day 15 that figure could rise to 3.8 million barrels, and by day 18 to 4.7 million barrels a day. Iraqi officials cited by Reuters said Baghdad may be forced to cut more than 3 million barrels a day if tankers cannot leave through the Gulf.
That process has already begun. Reuters reported on 3 March that Iraq had reduced production by nearly 1.5 million barrels a day because exports had been disrupted by the Hormuz closure. Cuts were reported at major southern fields including Rumaila, West Qurna 2 and Maysan. Iraqi officials said the country could be compelled to remove more than 3 million barrels a day from output within days if storage fills up and exports remain blocked.
The wider regional picture points to a broader energy shock rather than a narrow oil shipping incident. Reuters has reported that Qatar suspended LNG operations after Iranian drone strikes, affecting a market in which the Gulf state accounts for about 20 per cent of global liquefied natural gas supply. Saudi Arabia’s Ras Tanura complex was also hit. The country’s largest domestic refinery had already been shut after an earlier drone strike and was struck again on Wednesday by an unidentified projectile.
Markets have reacted accordingly. Brent and West Texas Intermediate crude both rose by more than 5 per cent over the last two trading sessions, while Brent traded above $82 a barrel on Wednesday, according to Reuters. On Monday, the opening move was even sharper, as traders priced in the possibility that the disruption at Hormuz would not be brief. Analysts expect prices to remain elevated in the near term as the market assessed both immediate supply losses and the risk of further attacks on energy infrastructure.
Banks have begun revising their outlooks. ANZ raised its average Brent forecast for the first quarter of 2026 to $90 a barrel and lifted its LNG forecast to $17 per million British thermal units. Goldman Sachs raised its average Brent forecast for the second quarter of 2026 by $10 to $76 a barrel and its WTI forecast by $9 to $71, while cutting its fourth-quarter 2026 projections to $66 for Brent and $62 for WTI. Goldman said the risks to its forecast remained tilted upwards if flows through Hormuz were disrupted for longer or if further infrastructure damage occurred.
The consequences are likely to be felt first in Asia. China and India together accounted for close to two-thirds of Iraq’s crude exports in 2025, while Europe received a smaller but still material volume of about 560,000 barrels a day. India’s state refiners and officials are already coordinating contingency measures, while Russian suppliers are preparing to divert more crude towards India to offset Middle Eastern losses.
This leaves the market facing two overlapping risks. One is the direct loss of Iraqi and Kuwaiti exports if the closure continues. The other is a cumulative regional supply squeeze caused by attacks on refineries, LNG plants, ports and shipping. The immediate result is a higher geopolitical premium in oil and gas prices. The larger question is whether military escalation in the Gulf turns a temporary market shock into a longer disruption to physical supply. For now, traders appear to be assuming that the danger is no longer theoretical.
