JPMorgan Sees Growing Demand Losses as Hormuz Closure Drains US Reserve to 43-Year Low
The US Strategic Petroleum Reserve has fallen to its lowest level since 1983 as Hormuz disruptions strip global buffers faster than governments can replace them.
ICE Brent crude front-month was trading at $87.01 a barrel on Tuesday (2026-08-25), roughly 10% above where it settled when a US-Iran peace agreement began reopening Hormuz shipping lanes in late June, as that deal's subsequent breakdown pushes traders back toward supply-scarcity pricing.5
The US Strategic Petroleum Reserve stood at 316 million barrels by mid-July (2026-07-21), its lowest level since 1983, down from 414 million barrels at the war's start, according to figures cited by Foreign Policy. That 98-million-barrel drawdown in roughly four months has left Washington with a thinner emergency cushion than at any point since the reserve was created following the 1973 oil crisis. J.P. Morgan analysts noted in their report that much of the modern energy system was built in direct response to that earlier vulnerability.7,2
J.P. Morgan analysts described the physical supply shock from the Hormuz closure as "immense" in a May report reviewed by Rigzone, with supply losses they said "were severe and intensified" even as broader financial markets appeared relatively calm. The bank warned of increasing monthly oil demand losses.2
Roughly 13 million barrels per day were stripped from global supply by the strait's closure, oilprice.com reported. The International Energy Agency had counted 164 million barrels released by governments and industry combined as of May 8 (2026-05-08), warning the drawdown pace was at a record and that shrinking buffers could support prices. An estimated 1 billion barrels of supply had already been lost to the market by mid-May, dwarfing the IEA's total planned release of 400 million barrels.1,3
J.P. Morgan put a sharper constraint on the usable cushion. Of the roughly 8.4 billion barrels held in global storage when Hormuz first closed, only about 800 million barrels could be accessed without pushing wells, pipelines, tankers, and refineries into operational limits, the bank's analysts estimated.7
US commercial crude inventories dropped 8.3 million barrels in data the Energy Information Administration released on Wednesday (2026-06-17), the latest in a series of drawdowns analysts said was keeping upward pressure on prices.4
ICE Brent crude front-month had risen from around $72 in late February to above $118 in March when the strait effectively closed. By late June, the US-Iran peace deal pushed it back below $80, and every major bank that published an oil price target for 2026 reset it lower, JPMorgan among them, according to Aol.com.5
Peace proved short-lived. By Monday (2026-07-13), Brent and WTI crude futures had both climbed 3.5% — Brent at $78.68 a barrel, WTI at $73.89 — as investors weighed renewed military tensions between Washington and Tehran, after retreating from an intraday rally of close to 5%.6
By July 21 (2026-07-21), Foreign Policy reported the peace arrangement had broken down entirely, with Brent rising again. NYMEX WTI crude front-month was at $81.11 a barrel on Tuesday (2026-08-25), up 0.57% on the day.7
Partial alternative supply routes have helped. Saudi Arabia rerouted 5 million barrels per day through its Red Sea terminal and the UAE boosted exports through its alternative port, Foreign Policy reported. Those diversions reduce but cannot close the throughput gap from Hormuz.7
Energy Aspects, in analysis sent to Rigzone on May 28 (2026-05-28), cautioned against overstating demand destruction. Strong backwardation and destocking were, the firm said, exaggerating bearish demand signals. Its high-frequency indicators showed limited consumer demand response to higher prices at that stage, a reading that pushed back against the most severe demand-loss forecasts circulating at the time.2
J.P. Morgan analysts, comparing the shock to 1973, said this crisis may push economies in a different direction than the efficiency gains that followed that earlier oil embargo. At 316 million barrels, the SPR offers Washington far less demand-side firepower than it held when the conflict started, and no US-Iran talks are publicly reported to have resumed.2,7