Iran is rapidly running out of places to store crude oil, and the consequences for global energy markets could be severe. With exports effectively halted under a US naval blockade, the country has between 12 and 22 days of unused onshore storage capacity remaining at current accumulation rates — a window that, once closed, will force accelerated production shutdowns across its already battered oil sector.
According to commodity intelligence firm Kpler, Iran may be forced to cut daily oil output by an additional 1.5 million barrels per day by mid-May if the blockade persists. Iranian crude exports, which averaged about 1.85 million barrels per day in March, have fallen to roughly 567,000 barrels per day in recent weeks — a collapse of nearly 70% in export volumes.
How the crisis reached this point
Shipping traffic through the Strait of Hormuz has been largely blocked since February 28, 2026, when the United States and Israel launched military operations against Iran. In retaliation, Iran’s Revolutionary Guard issued warnings forbidding passage through the strait, boarded and attacked merchant ships, and laid sea mines. Since April 13, the US has blockaded Iranian ports directly, creating what analysts have described as a dual blockade of the strait.
Until the conflict began, the Strait of Hormuz carried approximately 25% of the world’s seaborne oil trade and 20% of global LNG. Its effective closure has been described as the largest disruption to world energy supply since the 1970s energy crisis.
In early April, shipments through the Strait averaged around 3.8 million barrels per day, compared with more than 20 million barrels per day in February ahead of the crisis.
The compounding damage to Iran’s production
The storage crisis does not exist in isolation. Output has already fallen by approximately 750,000 barrels per day compared with pre-war levels, reflecting lower domestic demand during hostilities. Israeli strikes on five phases of the South Pars gas field have curtailed condensate and associated liquids capacity by 100,000 to 120,000 barrels per day for at least the next six months — a shortfall that cannot be quickly offset.
Goldman Sachs estimated that Iran had already curtailed as much as 2.5 million barrels per day of crude output in the period leading into late April. The additional storage-forced cuts now looming would deepen this reduction further.
The revenue lag — and what it means
The blockade will not hit Iran’s revenues quite as fast as its production. Iranian crude cargoes typically take about two months to reach Chinese ports — the main destination for Iranian crude — often via opaque channels designed to circumvent sanctions. Buyers then have a further two months to settle payments, meaning the full revenue impact may not be felt for three to four months. Kpler noted it has not observed any tankers successfully evading the US naval blockade in the region around the Strait of Hormuz.
The global spillover
Global oil supply plummeted by 10.1 million barrels per day to 97 million barrels per day in March, with the IEA describing it as the largest supply disruption in the history of the global oil market. Global crude refinery runs are now expected to decline by 1 million barrels per day on average in 2026.
Neighbouring Gulf producers have also been forced to adjust output, with Saudi Arabia, Iraq, Kuwait and the UAE among those that have reduced production. Exports through alternative routes — from Saudi Arabia’s west coast, Fujairah in the UAE, and the Iraq-Turkey pipeline — had increased to 7.2 million barrels per day, up from less than 4 million barrels per day before the war, but remain far short of compensating for the Strait’s closure.
India’s exposure
India, the world’s fourth-largest oil refining nation, has been significantly affected. Indian refiners have pivoted to Russian crude as Middle East supplies dried up. The government raised export duties on diesel and aviation fuel to contain domestic shortages, while LPG — 60% of which is imported, largely through the Strait of Hormuz — was the first fuel to face visible supply strain, with long queues and delayed deliveries reported in March.
The physical clock is now ticking. If no diplomatic resolution emerges in the coming days, Iran will face the choice between filling its last storage tanks and shutting in wells — a decision with consequences that will ripple through oil markets globally for months.