JP Morgan: Supply Cuts Near 12M bpd as Tanker Halt Tightens Oil Market

• Commercial tanker traffic through the Strait of Hormuz, which handles one-fifth of global oil supply, remains extremely limited with most vessels now Iranian-flagged and headed to China; supplies to Asia could run out this week and Europe-bound flows may halt next week
• Approximately 2 million bpd of Middle Eastern refining capacity is offline due to export constraints and infrastructure attacks, with about 5 million bpd of refined products normally transiting the disrupted waterway
• Europe faces particular vulnerability as it heavily depends on Middle Eastern diesel and jet fuel following its ban on Russian imports; limited spare refining capacity globally means adjustments will likely result in higher product prices rather than increased output

Summary: JP Morgan Reports Severe Oil Market Tightening Amid Strait of Hormuz Disruption

JPMorgan warns that crude oil supply cuts are approaching 12 million barrels per day (bpd) by late March 2026, driven by a two-week disruption of tanker traffic through the Strait of Hormuz following a U.S.-Israeli conflict with Iran. Production shut-ins have already reached approximately 6.5 million bpd, exceeding earlier estimates by 1 million bpd.

Key Market Impact:

• Global supply sits roughly 7 million bpd below demand, creating severe shortages
• Commercial tanker traffic through the strait—which handles one-fifth of global oil supply—remains extremely limited, with primarily Iranian vessels headed to China still operating
• Asian supply could be depleted this week, while Europe-bound flows may halt next week

Critical Supply Constraints:

• Approximately 5 million bpd of refined products (diesel, jet fuel, LPG, naphtha) typically transit the affected waterway
• Middle Eastern refining capacity of about 2 million bpd is effectively offline due to export constraints and infrastructure attacks
• Europe faces particular vulnerability, heavily reliant on Middle Eastern diesel and jet fuel after banning Russian imports

Market Response:

While refiners in the U.S., Europe, India, and Northeast Asia may attempt to increase operations to capitalize on strong margins, JPMorgan cautions that limited spare capacity and reduced crude availability will primarily result in higher product prices and firmer margins rather than meaningful supply increases.

The U.S. has issued permits allowing purchases of stranded Russian oil, while one India-flagged gasoline tanker successfully exited the strait on Friday. African officials have expressed concerns about the economic impact of sharp oil price increases on monetary policy and key sectors.