Morgan Stanley Warns Oil Buffers May Deplete Before Hormuz Reopens
Financial services firm Morgan Stanley has cautioned that global oil market buffers could be exhausted before the strategic Strait of Hormuz reopens, potentially triggering a significant surge in oil prices. The Strait of Hormuz, a critical chokepoint through which about 20% of the world’s oil passes, has been closed amid escalating regional tensions.
Analysts from Morgan Stanley highlighted that while adjustments in oil imports and exports—particularly reduced crude imports by China and increased exports from the United States—have helped to partially offset the supply disruptions caused by the closure, these measures may only delay the inevitable pressure on oil inventories and prices.
The investment bank noted that if the Strait of Hormuz remains closed through the end of June, these market buffers will be depleted. This could lead to Brent crude oil prices spiking sharply. Morgan Stanley’s commodity strategists explained that a reopening of the strait within June, with buffers still somewhat intact, is their baseline scenario. However, if the closure extends into late June or July, the market may face a steep price increase as it can no longer rely on existing buffers.
Despite these risks, Morgan Stanley has maintained its oil price forecast for 2026, projecting Dated Brent to average $110 per barrel in the current quarter, $100 in the third quarter, and $90 in the year’s final quarter. The bank also warned that a prolonged closure of the Strait of Hormuz could push Brent crude prices as high as $150 per barrel.
Concurrently, another major financial institution, Goldman Sachs, has reported that global oil inventories are rapidly declining and approaching an eight-year low due to accelerating depletion rates and regional supply losses. Such tight stock levels increase vulnerability to further supply shocks.
The prospects of the Strait of Hormuz reopening soon appeared dim following recent geopolitical developments. The latest US rejection of Iran’s response to a US-drafted peace proposal has raised concerns over the duration and severity of the disruption in oil flows through the region.
Market participants and energy policymakers are closely monitoring the situation, as extended disruption in this key maritime oil route could intensify price volatility and have broad implications for global energy security.
As the situation unfolds, countries dependent on oil imports, including Pakistan, remain attentive to developments, given the potential impact on energy prices and availability, which could influence both economic stability and energy strategy decisions.