Gulf Crude Production Down 57% as Hormuz Crisis Enters Third Month
Goldman Sachs reports 14.5 million barrels per day offline, creating the largest supply disruption since the 1970s energy crisis.
Gulf crude oil production has collapsed by 14.5 million barrels per day—a 57% decline from pre-war baselines—as the Strait of Hormuz closure enters its eighth week, according to a Goldman Sachs analysis released April 23. The disruption marks the largest supply shock in modern energy markets, surpassing the 1973 Arab oil embargo in both scale and velocity.
Brent crude traded at $108.11 per barrel on April 27, while WTI reached $96.03—levels not seen since 2022. Physical crude prices spiked to nearly $150 per barrel in April, per the International Energy Agency. Empty tanker capacity in the Gulf has fallen by 130 million barrels, roughly half of pre-crisis levels, creating logistical bottlenecks that will persist even after the Strait reopens.
-61%
-53%
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-23%
Production Losses by Producer
Iraq’s output collapsed from 4.2 million barrels per day in February to 1.6 million bpd in March, a 61% decline, according to OPEC data. Kuwait’s production plunged 53% month-over-month, while the UAE saw a 44% drop. Even Saudi Arabia, with alternative export routes through the Red Sea, recorded a 23% decline as fields were temporarily shut to preserve reservoir pressure during the crisis.
Global oil supply plummeted by 10.1 million barrels per day to 97 million bpd in March, per the International Energy Agency. The agency released 400 million barrels from emergency stockpiles in March, including 172 million from the U.S. Strategic Petroleum Reserve—a record drawdown that has done little to stabilise prices amid ongoing supply constraints.
“The largest supply disruption in the history of the global oil market.”
— Fatih Birol, International Energy Agency
Inflationary Transmission Across Refined Products
The Energy Information Administration forecasts retail gasoline prices will peak at $4.30 per gallon in April, with diesel reaching $5.80 per gallon. Diesel supply stress has compounded logistics costs across supply chains, particularly in Asia-Pacific markets dependent on Middle Eastern crude.
Cumulative supply losses by end-April stand at approximately 650 million barrels, with daily outages now exceeding 13 million barrels per day, according to the Atlantic Council. Each additional week of closure adds another 90+ million barrels to the deficit, tightening global inventories and forcing rationing across import-dependent economies.
Recovery Timeline Depends on Reservoir Integrity
Goldman Sachs estimates 70% of lost production could return within three months of Strait reopening, rising to 88% after six months—but only if wells remain structurally sound. Prolonged shut-ins risk permanent reservoir pressure loss, particularly in Iraq’s mature fields. “The longer the closure, the slower the production ramp,” according to Goldman Sachs.
Well flow rates degrade when production halts for extended periods, requiring costly workovers and pressure maintenance programs. Fields that remain offline past June face material risk of permanent capacity loss, which would structurally tighten global supply even after geopolitical resolution.
The Arabian Gulf accounts for 46% of global urea exports—critical fertilizer for India (18% of imports), Brazil (10%), and China (8%). Prolonged disruption threatens food production costs into the 2026-27 growing season, particularly for import-dependent agricultural economies with limited domestic fertilizer capacity.
Demand Destruction Begins to Register
Global oil demand is expected to contract by 80,000 barrels per day on average in 2026, the International Energy Agency projects, as high prices force consumption adjustments. Diesel rationing has begun in parts of Europe and Southeast Asia, while air travel demand has softened as jet fuel surcharges climb.
The Dallas Federal Reserve models indicate sustained prices above $100 per barrel could shave 0.4-0.7 percentage points from global GDP growth in 2026, with Inflation adding 0.8% to consumer price indices if disruptions persist through Q3.
What to Watch
Diplomatic momentum remains stalled following President Trump’s suspension of nuclear negotiations on April 25-27. Iranian President Masoud Pezeshkian has rejected talks under blockade conditions, leaving no clear pathway to Strait reopening. Weekly storage data from Cushing, Oklahoma and Rotterdam will signal whether emergency stockpile releases can bridge supply gaps into summer, or whether rationing measures must expand. Watch for OPEC production data in early May covering April output—any further declines in Saudi or UAE production would indicate worsening field integrity issues. Physical crude differentials between Brent and Dubai will show whether alternative export routes through the Red Sea are gaining traction, or if logistical constraints remain binding. The timing of reservoir pressure assessments from Iraq’s southern fields will determine whether the Goldman Sachs recovery timeline holds, or if permanent capacity loss is already underway.