UBS: If the Strait of Hormuz remains blocked, global crude oil inventories will drop to a historic low by the end of April.

UBS’s latest research warns that if the blockade of the Strait of Hormuz continues, global crude oil and refined oil inventories will fall to historical lows by the end of April, and Brent crude oil prices may rise above $150 per barrel, with further upside risk.

The Iran conflict showed no signs of easing this weekend. On Friday night, the US military struck military facilities on Hormuz Island, Iran’s main oil export hub, which handles around 90% of the country’s crude exports. Subsequently, the UAE’s Fujairah terminal was attacked by drones on Saturday—two crude oil storage tanks were reportedly damaged and operations were temporarily interrupted but resumed Sunday. US Energy Secretary Chris Wright said the war may continue for several weeks.

According to Chase Wind Trading Desk, UBS analyst Arend Kapteyn estimated in a report on the 16th that even by fully utilizing the Saudi pipeline (5 million barrels/day), UAE pipeline (500,000 barrels/day), ongoing Iranian exports (1.7 million barrels/day) and IEA strategic reserve releases (around 3.3 to 4 million barrels/day), these measures together can only offset about half the supply loss caused by a de facto Hormuz blockade, leaving a gap of about 10 million barrels/day. At the current rate of inventory consumption, global oil inventories will fall into the lower third of historic ranges by end-March, and reach historic lows by end-April.

For investors, low inventory levels mean oil prices will exhibit pronounced convexity – sensitivity to supply shocks will be far above historical averages. UBS conservatively estimates that if the situation in Hormuz does not materially improve by the end of March, Brent crude price could rise to about $120/barrel, advancing toward $150/barrel in Q2; before clear signs of demand destruction emerge, a $160/barrel scenario is also included in UBS models.

Supply Gap Hard to Fill: 10 Million Barrels/Day Still Unaccounted For

Under normal conditions, the Strait of Hormuz handles about 20.5 million barrels/day of oil and gas flows. A substantial blockade leads to a massive supply loss, and existing alternative routes or policy tools are insufficient to fully compensate.

UBS outlines currently available alternative supplies: Saudi’s land pipeline bypassing the strait can supply 5 million barrels/day; UAE’s Fujairah bypass pipeline can provide 500,000 barrels/day; some Iranian exports continue (1.7 million barrels/day); IEA’s strategic reserves are expected to release about 3.3 to 4 million barrels/day. Even if all these measures are in place, total additional supply is only about 10.5 million barrels/day. This still leaves a supply gap of roughly 10 million barrels/day that must be filled by rapidly tapping global inventories.

Notably, the Fujairah terminal itself was affected in the conflict, posing uncertainty to its operational reliability – the actual supply capacity of the UAE bypass pipeline remains variable.

Strategic Reserve Release Accelerates, Limited Time Window

Another UBS analyst, Henri Patricot, showed in a March 16th report that the IEA on March 15th released more details about its emergency release plan among member nations, with a total scale of 400 million barrels and planned flow near 4 million barrels/day. However, the buffer effect remains limited and there is an obvious time lag.

According to IEA, this release is 72% crude oil, 28% refined products. Asian members will account for about 25% of the total release and can act immediately, but Americas and European logistics will only be truly in place by late March. The US plans to release 172 million barrels of SPR at roughly 1.4 million barrels/day; Japan’s release rate is about 1.8 million barrels/day.

Even at the latest IEA figure of around 4 million barrels/day, the strategic reserve release only covers about 30% of total Hormuz blockade losses – not enough to fundamentally reverse the inventory depletion trend.

Moreover, global inventory distribution is extremely uneven. Data shows that many low-income Asian oil-consuming countries have inventory cover far below the global average, and if supply continues to be constrained, these countries will reach critical levels first. UBS points out this will significantly increase the likelihood of panic buying – as countries scramble to secure supply before their own inventories run out, further amplifying the demand-driven price surge effect.

Accelerated Inventory Depletion: Drops to Historic Lows by End-March

Under a supply gap of about 10 million barrels/day, the pace of global oil inventory depletion has accelerated significantly. UBS calculates based on historical data that at current rates, global crude and refined oil inventories will drop into the lower third of historic ranges by end-March, and may reach historic lows by the end of April.

In terms of absolute inventory volumes, current global observable stocks (including OECD, non-OECD and oil in transit) total about 9,000–9,300 million barrels. UBS’s scenario modeling shows that if Hormuz traffic remains restricted throughout March, inventories will accelerate toward historic lows.

OECD industrial stocks are also under clear downward pressure. According to IEA’s February 2026 monthly report, current OECD stocks are already below the rolling five-year average. Tight supply was present even before the conflict broke out.

Price Convexity Under Low Inventories: $160 Scenario Not Extreme

There is a historically proven nonlinear relationship between oil prices and global inventories: when stocks drop to historic lows, prices react far more violently to further supply contractions, which is the “price convexity” effect UBS emphasizes.

According to UBS’s model, under continued Hormuz blockade, Brent crude price trajectory is expected as follows: about $120/barrel by end-March, over $150/barrel by end-April. If the demand destruction signal remains unclear by then, a $160/barrel scenario is realistically possible and included in UBS’s scenario range.

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The above content is from Chase Wind Trading Desk.

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