Oil flows through the Strait of Hormuz have collapsed amid the escalating Middle East conflict, with shipments now running far below normal levels, according to a new tracker note from Goldman Sachs.

Based on vessel counts, the bank estimates that “average daily flows through the Strait of Hormuz are down 97% from their normal levels,” with shipments stabilizing at roughly 0.6 million barrels per day in recent days.

The disruption has translated into a major hit to Persian Gulf exports. Goldman Sachs estimates the total reduction in flows from the region has reached around 16 million barrels per day, even after accounting for partial rerouting through alternative ports such as Yanbu in Saudi Arabia and Fujairah in the United Arab Emirates.

Production and refining outages are also adding to the supply shock. The International Energy Agency (IEA) estimates at least 10 million barrels per day of crude and condensate production losses as of March 10, while refinery disruptions in the Middle East have climbed to about 2.0 million barrels per day following a precautionary halt at the UAE’s Ruwais refinery.

Governments are beginning to respond to the supply shock, though Goldman Sachs expects these measures to offset only part of the disruption. IEA member countries have agreed to make 400 million barrels of strategic petroleum reserves (SPRs) available to the market, implying a potential release pace of roughly 3.3 million barrels per day.

“We assume that the participants will release 213mb of SPR at an average speed of 2.4mb/d over the next 90 days if SoH flows start to recover from March 21st (faster than the peak monthly 1.4mb/d pace in 2022 as today’s shock is much larger),” Goldman strategists wrote.

They estimate that coordinated releases from global reserves and other policy measures could dampen the hit to global commercial inventories by roughly half.

Markets are increasingly pricing a longer disruption. has surged from just under $90 to above $100 per barrel since earlier in the week, while options markets now imply about a 15% probability that Brent contracts expire above $100 in the coming months.

Prediction markets also suggest the conflict may persist as the probability that the war ends in March dropped to about 19%, though the most likely outcome still points to a resolution between early April and mid-May.

Source: Investing.com