Can the region store what it can’t ship? Early in the war, the focus was on whether Gulf producers could keep energy supplies flowing as LNG and crude exports faced mounting disruption, facilities were stranded, and output was curtailed. Today, the concern is different. Production can restart and cargoes can be readied, but if Hormuz remains closed, the critical question becomes one of storage rather than supply: Where will the region put its oil and LNG when it has nowhere to send them?

The model is built for flow, not gridlock

The Gulf’s production system was not initially designed for a prolonged export disruption. “Producers of crude oil and condensates in the Gulf region typically have limited need for large storage capacity beyond what is required for logistical purposes,” global oil markets strategist and former Onyx Group head of research Harry Tchilinguirian tells EnterpriseAM.

Storage serves a logistical, not a strategic, role: Most onshore tanks are designed to manage routine operational fluctuations — smoothing the flow of crude between production fields, gathering facilities, and export terminals, or accommodating temporary reductions in throughput during maintenance periods, Tchilinguirian says.

Short-term disruptions are manageable: Producers can absorb temporary bottlenecks by drawing on onshore storage and, when necessary, floating storage. “Delays in deliveries or changes in volume can be managed through adjustments in onshore — and, at times, floating — storage,” Tchilinguirian notes. That provides a degree of flexibility, but only for disruptions measured in days or weeks rather than months.

The larger buffer sits with consumers: The situation differs markedly for refiners and importing countries, which typically maintain significantly larger inventories. Their supply chains are more exposed to interruptions, and refineries must continue operating through shipping delays, infrastructure outages, geopolitical disruptions, civil unrest, and even discretionary Opec+ production cuts. As a result, strategic stockpiles and commercial inventories tend to be concentrated on the consuming side of the market rather than at the production source.

The bottleneck moves upstream fast: “When producers are unable to deliver crude to customers — as is the case in the current US-Iran conflict, given the effective closure of Hormuz — crude accumulates in storage, which can quickly reach capacity. Production is then curtailed at the wellhead,” Tchilinguirian argues.

The buffer map is uneven

Not all Gulf producers face the same level of exposure: Saudi Arabia and the UAE retain partial alternatives to Hormuz through export infrastructure on the Red Sea and the Gulf of Oman. Saudi crude can be redirected to Yanbu via the East-West pipeline, while the UAE can ship volumes through Fujairah. But those alternatives “offer limited offsets in view of the volumes typically exported from terminals in the Persian Gulf,” Tchilinguirian says.

Saudi Arabia has the region’s strongest fallback option: Riyadh's principal hedge is the East-West pipeline — which, with a capacity widely estimated at around 7 mn bbl / d, gives Saudi Arabia the largest ability in the region to bypass Hormuz, though it still cannot fully replace all Gulf export flows.

Fujairah remains the UAE’s pressure valve: Abu Dhabi already operates the Abu Dhabi Crude Oil Pipeline, which can transport around 1.8 mn bbl / d directly to Fujairah, outside the Strait of Hormuz. The UAE is also advancing plans for a new West-East pipeline that would roughly double export capacity through Fujairah by 2027, further reducing its dependence on the strait.

Oman benefits from geography: Oman’s main crude export terminal at Mina Al Fahal gives the Sultanate a structural advantage over Gulf-facing exporters, Welligence Energy Analytics MENA analyst Eric Soosay tells EnterpriseAM. Oman’s longstanding neutral relationship with Tehran has also helped shield it from deeper escalation, although risks remain. However, early-March attacks on Duqm and Salalah underscored that even exporters outside Hormuz are not entirely insulated from regional instability.

Iraq and Kuwait have borne the brunt of the disruption: Without meaningful alternatives to Hormuz, both countries have been significantly more exposed. “Iraq and Kuwait have therefore been more immediately affected,” Tchilinguirian says. Iraq’s southern production fell sharply as storage capacity tightened and export routes were cut off, dropping to around 800k bbl / d from roughly 4.3 mn bbl / d before the conflict. Exports through Hormuz in April totaled only 10 mn barrels, compared with a pre-war monthly average of around 93 mn barrels.

In Kuwait, the storage countdown was measured in days: The country exported roughly 1.9 mn bbl / d of crude and 860k bbl / d of refined products through Hormuz in 2025. JPMorgan estimated Kuwait had only around two weeks before storage constraints would force production cuts. Kuwait Petroleum Corporation later declared force majeure and began reducing crude output and refinery operations as shipments were disrupted. Reports also indicated that all three of Kuwait’s major refineries were forced to lower processing rates as inventories continued to build.

Iran offers a real-time example of what happens when production continues but exports cannot leave. If shipments remain constrained, crude inventories at Kharg Island — the country’s main export terminal — will continue to build until storage capacity is exhausted, ultimately forcing production shut-ins, Tchilinguirian tells us.

Can floating storage give Tehran breathing room? Unlike many of its Gulf peers, Iran has developed a sizable offshore storage buffer. “In addition to onshore storage, the country has quite an extensive fleet of vessels no longer fit for travel but that serve as floating storage,” Tchilinguirian says. These vessels effectively extend Iran’s storage capacity and delay the point at which production cuts become unavoidable.

The offshore tanker queue is growing: As US restrictions have tightened export controls, Iran has increasingly relied on aging tankers anchored in the Gulf to store unsold crude. The number of Iranian vessels moored near Kharg Island has risen sharply, and floating crude inventories have continued to climb, illustrating how storage becomes the final outlet when market access is constrained.