Day Six
From Geopolitical Risk to Real Supply Destruction
Six days ago, the United States and Israel launched Operation Epic Fury — a coordinated assault on Iran's nuclear infrastructure, military command, and leadership. Iran's Supreme Leader was killed. Iranian missiles began hitting US bases and Gulf energy facilities in retaliation. And the Strait of Hormuz, the narrow S-curve of water between Oman and Iran through which roughly 20% of the world's daily oil supply flows, effectively shut down.
Not by a military blockade. By insurance. Iran struck five ships in the first four days. Insurers withdrew cover. Shipping companies suspended operations. No insurer would underwrite a tanker through a waterway under active missile and drone attack. As Helima Croft, global head of commodities research at RBC Capital Markets, put it: "All Iran had to do was several drone strikes in the vicinity of the strait — and all of a sudden, insurers and shipping companies decided it was unsafe to traverse that very narrow S-curve. It's really an insurance-driven shutdown."
Today is Day Six. US crude oil spiked more than 11% to more than $90 per barrel, its highest price since October 2023. Brent, the international benchmark, broke $90 per barrel as it jumped more than 8% — its highest level since April 2024. The S&P 500 fell more than 1%. The Dow Jones slid 600 points. And JPMorgan's commodities team delivered the bluntest assessment yet: the market is no longer pricing geopolitical risk. It is pricing real operational disruption.
This is no longer a fear premium. Barrels are physically going missing — and the count is growing by the hour.
The Domino Effect
Kuwait, Iraq, Qatar — The Gulf Is Running Out of Room
Here is the mechanics of what is happening, because it matters. Gulf oil producers pump crude into export terminals, where it is loaded onto tankers and shipped to buyers around the world. When tankers cannot transit the Strait of Hormuz — because insurers won't cover the transit — those tankers stop coming. The crude keeps flowing from the fields into the terminals. The storage tanks fill up. And when the tanks are full, the fields have to shut down. There is nowhere else for the oil to go.
Iraq has cut oil production by nearly 1.5 million barrels a day, and those cuts could widen to more than 3 million bpd within days as the country runs out of storage and cannot export crude. The Rumaila field — Iraq's largest, operated by BP — has been shut. The West Qurna 2 and Maysan fields have followed. Kuwait has begun cutting production at some oil fields after running out of room to store its bottled-up crude, and is discussing limiting its production to just what it needs to cover domestic consumption. Saudi Arabia's storage tanks are expected to reach their limits within three weeks at current rates.
QatarEnergy has halted LNG production at two processing sites. Ras Tanura, Saudi Arabia's largest refinery, has been shut as a precaution after drone attacks. A fire was reported at Fujairah Port in the UAE. Qatar's energy minister warned oil prices could soar to $150 a barrel within weeks as the Strait of Hormuz remains de facto closed to tankers.
Under JPMorgan's updated calculations, if Hormuz remains blocked, around 3.3 million barrels per day of crude production could already be forced offline by Day 8 — three days from now — rising toward 3.8 million bpd by Day 15 and approaching 4.7 million bpd by Day 18. And that math only captures crude. Refined products, LNG, and petrochemicals are not included in that figure. The moment tanks hit their limit, the market shifts from a transport bottleneck to a genuine upstream supply contraction — and that is a categorically different kind of crisis.
The Human Cost
This Is Not Abstract. People Are Already Paying.
At the pump in the United States — the country that started this war — the national average for a gallon of regular gasoline jumped nearly 35 cents in the week since the war began, reaching $3.32. European natural gas prices surged 38%. Asian LNG spot prices are spiking. Japan's refiners, who obtain about 95% of their crude from Saudi Arabia, Kuwait, the UAE, and Qatar — the majority transiting Hormuz — have already asked their government to release stockpiled reserves.
In Iraq — a country where oil revenues pay nearly every public sector salary and fund virtually all government services — the economic consequences of these production cuts are existential. If the shutdown persists for a month, analysts warn of salary defaults and social unrest. If halting production and exports persist for a single month, it is likely to lead to social and political upheaval in Iraqi streets and the Kurdistan Region — potentially turning the country into a powder keg. Iran-backed armed groups are already fuelling protests in Iraqi cities. A government that cannot pay its workers is a government fighting for survival.
Pakistan, which cannot afford this energy shock at any price, has already formally requested Saudi Arabia reroute crude supplies through the Red Sea port of Yanbu to bypass the closed strait. Saudi Arabia is arranging shipments. But the Red Sea itself — where the Houthis are reloading for a fresh campaign — is not exactly a safe alternative corridor right now.
India's Exposure
India Is in the Crosshairs — and the Clock Is Ticking
India and China are the two biggest buyers of Iraqi crude exports, together accounting for nearly two-thirds of Iraq's 3.33 million bpd average exports in 2025. China and India are also heavily dependent on Gulf LNG and Gulf crude more broadly. Around 17% of global LNG deliveries in 2026 normally transit the Strait of Hormuz, with more than 90% of those cargoes destined for Asian buyers. Jamnagar's Reliance refinery — the world's largest — is being specifically flagged by market analysts as the primary alternative source for clearing European jet fuel demand as Middle Eastern exports dry up. India is simultaneously an exposed importer and a critical alternative supplier. That is an unusual and strategically significant position.
India imports roughly 40% of its crude through the Strait of Hormuz in normal conditions. With the strait effectively closed, Indian refiners are scrambling for alternatives — Russian crude from the west, African barrels, American crude from the east. Every alternative route costs more, takes longer, and carries higher insurance premiums. For a country that imports over 85% of its total crude requirements, the fiscal arithmetic tightens fast. The rupee is under pressure. The RBI is watching inflation indicators it expected to have under control. The Union Budget's energy subsidy assumptions were built for $75 oil — not $90, and certainly not the $100–$150 scenario Qatar and JPMorgan are now openly discussing.
My Take — Santhosh Vishwamitra
Let me say what most commentators are dancing around: the world is looking at an energy crisis that has no clean exit in sight. The Strait of Hormuz cannot be reopened by diplomacy alone — Iran controls the closure through insurance warfare, not physical blockade, which means no amount of US naval escorts fully solves the problem. Every tanker captain and every insurer makes their own calculation. And as long as missiles are flying anywhere near that corridor, the calculation will remain unfavourable.
For India, the urgency of building strategic petroleum reserves — real ones, not aspirational targets — has never been more viscerally obvious. India's current strategic reserve holds approximately 37 million barrels across its three facilities at Visakhapatnam, Mangaluru, and Padur. That covers roughly 9–10 days of consumption. The IEA standard for developed economies is 90 days. India is not a developed economy yet, but it is the world's third-largest oil consumer — and the gap between its reserve capacity and its actual vulnerability is a strategic liability that the Modi government has acknowledged but not yet closed fast enough.
The broader lesson this crisis is teaching the world in real time: energy security is national security. Countries that treated cheap and predictable oil as a permanent condition are now discovering the cost of that assumption. India cannot afford to be among them. The window to build resilience — before the next crisis, not during it — is short. This week's events are the loudest possible argument for using it.
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