Jono Maryono
The United States’ imposition of a naval blockade on Iranian ports and the vital Strait of Hormuz, commencing on April 13, has ignited significant concerns regarding Iran’s ability to sustain its crude oil storage capacity, potentially forcing a drastic reduction in its production. Analysis from the data and analytics firm Kpler, as reported by Bloomberg on Tuesday, suggests that if the blockade persists, Iran could exhaust its crude oil storage facilities within a mere 12 to 22 days. This alarming projection follows a statement last week from United States Treasury Secretary Scott Bessent, who asserted that storage capacity at Kharg Island, the primary hub for Iran’s oil exports, would be completely filled "in a matter of days." The unfolding situation raises critical questions about the immediate future of Iran’s oil industry and its broader economic implications.
The Strategic Significance of the Strait of Hormuz
The Strait of Hormuz, a narrow maritime chokepoint, serves as the sole sea passage connecting the Persian Gulf to the open ocean. Bordered by Iran to the north and Oman to the south, it is not situated in international waters, granting Iran significant leverage over maritime traffic. Under normal peacetime conditions, this crucial waterway facilitates the transit of approximately 20 percent of the world’s total oil and liquefied natural gas (LNG) supplies, underscoring its global economic importance.
The current tensions have escalated dramatically. Merely two days after the United States and Israel initiated their first air strikes in their ongoing conflict with Iran on February 28, Ebrahim Jabari, a senior advisor to the commander-in-chief of Iran’s Islamic Revolutionary Guard Corps (IRGC), declared the Strait of Hormuz "closed." He issued a stark warning, stating that any vessels attempting to pass through would be met with destruction by the IRGC and navy, vowing to "set those ships ablaze."
As the conflict has endured and diplomatic negotiations have failed to yield a resolution, Iran’s approach to the Strait has become more complex. In recent months, Tehran has selectively permitted passage for a limited number of "friendly" vessels and those that comply with imposed tolls. However, the current stance, directly linked to the US naval blockade, is absolute: Iran is refusing passage to all foreign-flagged ships, including those previously considered allies, until the US lifts its own maritime restrictions.
Mohammad Reza Aref, Iran’s First Vice President, articulated this position unequivocally on April 19, stating via X that "the security of the Strait of Hormuz is not free." He elaborated, "One cannot restrict Iran’s oil exports while expecting free security for others." Aref concluded with a clear ultimatum: "The choice is clear: either a free oil market for all, or the risk of significant costs for everyone. Stability in global fuel prices depends on a guaranteed and lasting end to the economic and military pressure against Iran and its allies."
In the wake of the US naval blockade of the Strait, documented incidents have heightened the stakes. The US has reportedly fired upon and taken control of an Iranian-flagged tanker near the Strait, while also intercepting vessels on the high seas en route to or from Iran. Iran’s armed forces have vehemently condemned these actions, labeling them "an illegal act" that "amounts to piracy." The practical consequence of the US blockade is that Iran is increasingly compelled to store its domestically produced oil, a situation with potentially dire ramifications. Iran, as the third-largest oil producer within the Organization of the Petroleum Exporting Countries (OPEC) – following Saudi Arabia and Iraq – relies heavily on the Strait of Hormuz for its exports, with approximately 90 percent of its crude oil being shipped through Kharg Island for onward transit.
US Objectives and Claims
The United States has explicitly stated its objective: to curtail Iran’s oil revenues, which have seen a notable increase during periods when Tehran has previously controlled the Strait of Hormuz. This strategic imperative appears to be the driving force behind Washington’s implementation of the naval blockade on Iranian ports.
According to Kpler data, Iran’s crude oil exports averaged 1.84 million barrels per day (bpd) in March and 1.71 million bpd in April. This figure represents an increase from the average of 1.68 million bpd recorded in 2025. However, the US naval blockade, initiated in mid-April, has now rendered these export levels unsustainable, forcing the majority of this oil to be stored domestically.
In a post on X dated April 22, Treasury Secretary Scott Bessent declared, "In a matter of days, Kharg Island storage will be full and the fragile Iranian oil wells will be shut in." He further emphasized the strategic impact, stating, "Constraining Iran’s maritime trade directly targets the regime’s primary revenue lifelines."
Iran’s Storage Capacity Under Pressure
Iran’s domestic refineries possess a combined production capacity of 2.6 million bpd, as estimated by the energy consultancy Facts Global Energy. Satellite imagery and data analyses have revealed a significant surge in Iran’s oil storage levels since the commencement of the US blockade. In the days immediately following the tightening of the blockade, inventories escalated so rapidly that it suggested Iran was barely able to export any oil.
Data compiled by the Columbia Center on Global Energy Policy (CGEP) indicates that from April 13 to April 21, Iran’s stored oil stocks increased by over 6 million barrels. The period between April 17 and April 21 saw particularly rapid accumulation, with stocks growing at a rate of 1.7 million bpd. By April 20, storage tanks at Kharg Island were reported to be approximately 74 percent full, having absorbed roughly 3 million additional barrels of oil.
While industry best practices typically advise against filling storage beyond 80 percent capacity to ensure safety, emissions control, and operational flexibility, Iran has, in the past, operated beyond these limits. During the COVID-19 pandemic in April 2020, Kharg Island’s storage facilities approached 90 percent capacity, marking an all-time high. Beyond onshore storage, Iran also possesses significant "floating storage" capacity, utilizing parked vessels. Frederic Schneider, a nonresident senior fellow at the Middle East Council on Global Affairs, informed Al Jazeera on April 14 that approximately 127 million barrels can be stored in this manner.
The Inevitability of Production Cuts?
The escalating pressure on storage facilities raises the specter of mandatory production cuts for Iran. Muyu Xu, a senior crude oil analyst at Kpler, explained to Al Jazeera that the blockade could ultimately compel Iran to reduce its output. "However, given there is still available storage capacity onshore (roughly covering 20 days of Iran’s current production), we expect any production reduction to be gradual over the coming week with a higher likelihood of acceleration into May," she stated.
This perspective is echoed by Antoine Halff, a nonresident fellow at CGEP, who noted in a recent article that it might take some time before the US blockade forces Iran into substantial production shutdowns. Halff suggested that Iran might, however, opt to halt production "fairly aggressively" as a strategic choice rather than an absolute necessity. He posited that such a move would offer Iran the advantage of retaining relatively ample spare storage capacity post-shutdown, facilitating a smoother restart of operations when conditions permit and the constraints are relaxed, thereby minimizing long-term adverse impacts on supply.
Broader Implications and Economic Fallout
The decision to halt oil production carries significant risks for Iran’s energy sector. Experts warn that such a move could potentially damage underground reservoirs by diminishing reservoir pressure. This reduction in pressure can lead to water or gas encroaching into producing layers, altering oil flow patterns and making future extraction more difficult and expensive. Furthermore, the process of restarting oil production can be a slow and costly endeavor, often requiring repairs to corroded equipment and the unclogging of pipelines.
Beyond the operational challenges, a halt in production would inevitably lead to a substantial decline in Iran’s export revenues. However, analysts note that for a transitional period of several months, Iran can continue to generate revenue from oil already in transit at sea. Kenneth Katzman, a former Iran analyst at the Congressional Research Service in Washington, D.C., indicated that while Iran is not currently exporting new oil under the US blockade, Tehran has an estimated 160 to 170 million barrels of oil currently held on ships globally. This existing inventory provides a temporary financial buffer, but the long-term sustainability of Iran’s economy hinges on its ability to resume oil exports and navigate the complex geopolitical landscape. The current situation underscores the profound impact that maritime control and energy sanctions can have on a nation’s economic stability and its standing in the global energy market.
