Morgan Stanley Calls Out that Oil Buffers Could Run Out Before Hormuz is Reopened

In a stark warning that underscores the fragility of the global oil market amid the ongoing disruption in the Strait of Hormuz, analysts at Morgan Stanley have declared the oil market is in a “race against time.” The investment bank’s commodity team, led by Martijn Rats, cautions that key market buffers — built up before the Iran conflict escalated — could be exhausted before the critical chokepoint reopens, potentially sending Brent crude prices surging toward $130–$150 per barrel if the closure drags into late June or July.

What This Means: The Buffers and the Bottleneck

The Strait of Hormuz, through which roughly one-fifth of global oil and LNG trade normally flows, has been effectively blocked or severely restricted since Iran’s response to U.S.-Israeli strikes in late February 2026. Shipping traffic has plummeted to a fraction of pre-crisis levels, creating a supply shock estimated at up to 16–20 million barrels per day at peak disruption. Despite the loss of nearly 1 billion barrels from global inventories since early March, oil futures have not yet surpassed 2022 peaks.

Morgan Stanley attributes this relative price restraint to three main buffers:

Pre-crisis inventories: Global stockpiles entered the crisis with a cushion.
U.S. export surge: American seaborne crude exports have risen by approximately 3.8 million barrels per day.
China’s import restraint: Beijing has cut seaborne imports by about 5.5 million barrels per day.

Together, these moves have absorbed roughly 9.3 million barrels per day of tightness, shielding the rest of the world. However, the analysts emphasize that “the path matters.” Their base-case scenario assumes the Strait reopens within June while U.S. and Chinese buffers remain at least partly intact. A prolonged closure beyond late June would force the physical Brent price to “do the work it has so far been able to avoid” — meaning sharp price spikes to balance the market through demand destruction.

Morgan Stanley has not revised its official price forecasts — still calling for Dated Brent to average $110/bbl in Q2 2026, $100 in Q3, and $90 in Q4 — but the upside risk in a delayed-reopening scenario is clear: as high as $150 per barrel.

What Other Analysts Are Saying

Morgan Stanley is not alone in sounding the alarm. Other major banks and industry voices paint a similarly urgent picture:

JPMorgan Chase (Natasha Kaneva, head of global commodities research): OECD inventories could hit “operational stress levels” as early as early June if the Strait stays closed, reaching an “operational minimum” floor by September. Kaneva notes that inventories act as the system’s shock absorber, but “not every barrel can be drawn” due to pipeline, tank, and terminal constraints. Global draws have been extreme — 7.1 million barrels per day in April alone in some estimates.

Goldman Sachs: Global observable oil stocks are approaching an eight-year low (around 101 days of demand coverage, potentially falling to 98 days by end-May). While total stocks are unlikely to hit minimum operational levels this summer, the speed of depletion — especially in refined products like jet fuel, naphtha, and LPG — is “concerning.” Persian Gulf output is down roughly 57% from pre-war levels.

Saudi Aramco CEO Amin Nasser: The world is losing around 100 million barrels per week while the Strait remains closed. The market has already been deprived of about 1 billion barrels over the past two months; full normalization could take until 2027 if disruptions persist even a few more weeks.

The consensus is clear: inventories are the last line of defense, and they are burning through faster than at any point in modern history.

How This Intersects with the Trump-Xi Meeting This Week

President Donald Trump is scheduled to meet Chinese President Xi Jinping in Beijing this week (May 14–15), with the Iran conflict and Strait of Hormuz topping the agenda alongside trade, AI, and Taiwan.

The urgency of Morgan Stanley’s “race against time” warning is likely to sharpen the focus on energy security. The White House has been pressing China to use its influence with Iran to help reopen the Strait. China, which has already urged Tehran to restore shipping traffic and hosted Iranian Foreign Minister Abbas Araghchi recently, maintains significant leverage as a major buyer of Iranian oil. Trump officials have signaled they will apply pressure on Beijing regarding sanctions compliance and Iranian crude purchases.

Any U.S.-China cooperation — or even the perception of progress — on Hormuz could provide immediate relief to oil markets. Analysts note that joint diplomatic efforts could accelerate a ceasefire deal or safe-passage arrangements, potentially unlocking flows sooner than markets currently expect. Conversely, if the summit yields no breakthrough, the buffers could evaporate even faster, amplifying price volatility heading into summer.

The meeting also carries broader implications: Beijing may seek trade or economic concessions in exchange for help on Iran, while Washington views energy stability as critical to avoiding higher inflation and economic pain.

What This Means for Consumers and Investors

For Consumers:
Prolonged high or spiking oil prices would translate directly into higher gasoline, diesel, heating oil, and jet fuel costs. U.S. households, already seeing energy as a smaller share of spending than in past shocks, could still face renewed inflationary pressure on transportation and goods. Global ripple effects — especially in Asia, heavily dependent on Hormuz flows — could exacerbate shortages of refined products and drive up costs for everything from plastics to fertilizers.

For Investors:

Energy sector upside: Oil majors, explorers, and service companies stand to benefit from sustained higher prices and eventual reopening-driven recovery.

Broader risks: Inflation-sensitive assets, airlines, and consumer discretionary stocks could face headwinds. Equity markets may price in higher-for-longer rates if energy costs reignite CPI.
Commodities play: A diversified commodities allocation (oil plus metals and ag) has historically helped portfolios weather such shocks, per Morgan Stanley’s own analysis.

Timing matters: Markets are still pricing in a relatively swift resolution. A “July regime” could trigger sharp repricing.

In short, Morgan Stanley’s note is a reminder that while the market has bought time, that time is running out. The coming days in Beijing could determine whether the race ends in relief — or in a price shock.