UAE forecasts Strait of Hormuz won’t reach full capacity until mid-2027

The head of the UAE’s national oil company said full crude flows through the Strait of Hormuz won’t return until the first or second quarter of 2027, even if the conflict ends immediately—extending the disruption that began in February 2026 by at least 18 months and cementing elevated oil prices as a structural feature of global markets through next year.

Sultan Al Jaber, CEO of ADNOC, told an Atlantic Council event on May 20 that restoring 80% of pre-disruption flows would take at least four months from a ceasefire, with full capacity restoration pushed into 2027. The timeline aligns with warnings from Saudi Aramco CEO Amin Nasser, who told investors on May 10 that delays beyond mid-June would push normalization into next year.

The convergence between the Gulf’s two largest producers—collectively responsible for over 10 million barrels per day—establishes industry consensus around a recovery arc that extends well beyond initial market expectations. Brent crude traded at $108.76 per barrel as of May 21, according to Fortune, sustaining a $40+ premium over pre-crisis levels despite periodic volatility.

The supply shock arithmetic

The strait has functioned at approximately 2% of normal capacity since Iran imposed a de facto blockade following Operation Epic Fury on February 28. Only 2 vessels transited the waterway in the 24 hours ending May 21, compared to a pre-crisis baseline of 95 daily crossings, per IMF PortWatch data. That translates to roughly 100 million barrels lost per week from a corridor that previously carried 20% of global oil consumption and 25% of seaborne crude trade.

The cumulative loss has exceeded 1 billion barrels over 83 days, creating what Aramco’s Nasser described as the largest Energy supply shock in modern history. Existing bypass infrastructure—including pipelines through Saudi Arabia and the UAE—can reroute 3.5 to 5.5 million barrels per day, according to the International Energy Agency, leaving a structural gap of 14 to 16 million barrels daily that cannot be offset through alternative routes.

Infrastructure gaps and investment deficits

The UAE is accelerating completion of a West-East Pipeline project that will double its Hormuz-bypass capacity to 3.6 million barrels per day through the port of Fujairah. The pipeline reached 50% completion as of May 2026, ADNOC confirmed, with full operational delivery targeted for 2027. Even at peak capacity, the combined bypass network across Gulf states would reroute less than half of normal Hormuz throughput.

Al Jaber tied the infrastructure shortfall to chronic underinvestment across the sector, noting that current upstream spending of $400 billion annually barely offsets natural decline rates. Global spare crude capacity sits at approximately 3 million barrels per day—well below the 5 million barrel buffer he considers necessary for market stability. The UAE’s May 1 exit from OPEC removed output quota constraints, signaling intent to expand production independent of cartel coordination as Hormuz alternatives scale.

Pricing floors and inflation expectations

Brent crude closed at $105.54 on May 20, down 5.16% from the prior session but still elevated within a 52-week range that peaked at $126.41, per Trading Economics. The sustained premium reflects trader reassessment of supply risk as a multi-year rather than transitory phenomenon. Aramco’s Nasser warned that even an immediate ceasefire would leave markets rebalancing for months, cementing a risk premium into forward curves through 2027.

For European economies heavily reliant on Gulf crude imports, the extended timeline compounds Inflation pressures and complicates central bank policy. Elevated energy costs flow through to transport, manufacturing, and consumer prices, narrowing the window for rate cuts that were expected in late 2026. The US, with greater domestic production and strategic reserve options, faces less direct exposure but remains vulnerable to global pricing dynamics.

Geopolitical leverage and precedent

Al Jaber framed the disruption as more than an economic crisis, telling the Atlantic Council that accepting a single nation’s ability to hold a critical waterway hostage sets a dangerous precedent. Iran’s blockade has functionally reversed decades of international norms around freedom of navigation in strategic chokepoints, with limited multilateral response despite the global economic impact.

The extended closure strengthens Iran’s negotiating position in any eventual settlement, demonstrating sustained capacity to impose costs on adversaries and their allies. For Gulf producers, it accelerates investment in bypass infrastructure and OPEC-independent production strategies, reshaping regional energy architecture around reduced reliance on Hormuz as a single point of failure.

What to watch

Progress on ceasefire negotiations will determine whether the four-month reopening timeline begins or the disruption extends further into 2026. ADNOC’s West-East Pipeline completion in 2027 will add meaningful bypass capacity, though not enough to fully offset Hormuz. Central bank commentary in June and July will reveal how policymakers are incorporating extended energy price elevation into inflation forecasts and rate decisions. Brent forward curves beyond Q4 2026 will show whether markets price the supply shock as structural or expect normalization once Hormuz reopens. Any additional supply disruptions—from conflict escalation, sanction enforcement, or OPEC output decisions—would compound tightness in a market already operating with minimal spare capacity buffers.