With the Strait of Hormuz still largely closed more than two months after the U.S. and Israel launched their war against Iran, oil inventories among top consuming countries are rapidly disappearing.

Frederic Lasserre, head of analysis at commodities trading giant Gunvor Group, said at an industry conference in late April that if the closure drags on for another month, oil markets will effectively run out of stockpiles and hit “tank bottoms.”

Similarly, analysts at JPMorgan said that oil inventories in OECD countries will hit “operational minimums” sometime between May 9 and May 30, “at which point price increases become exponential rather than linear.”

At the same time, the U.S. naval blockade has bottled up Iran’s oil exports, sending its own inventories higher as supplies have nowhere to go. If storage is maxed out and the industry hits “tank tops,” producers will have to drastically slash output, risking permanent damage to oilfields.

Coincidentally, Tehran faces a comparable timeline as the West does. Officials familiar with Iran’s energy policy told Bloomberg that the country has a narrowing window of roughly a month, at current production levels, before it runs out of storage capacity. JPMorgan and Kpler have made similar forecasts.

But Iran is scrambling to extend its moment of truth by proactively reducing crude output, according to Bloomberg. Meanwhile, Iran is reportedly putting old tankers back into service to act as floating storage and has explored shipping supplies by rail to China.

Iran’s oil sector also has extensive experience throttling production without hurting long-term capacity and has expressed confidence it will overcome the U.S. blockade.

For now, oil futures have not reached worst-case scenarios of $150-$200 a barrel. On Friday, West Texas Intermediate hovered around $102 and Brent crude topped $108, though prices for physical delivery are higher.

Helping cushion the blow of the supply shock, Saudi Arabia and the United Arab Emirates have used alternative export routes that bypass the Strait of Hormuz. The U.S., Japan, Europe and other top economies have coordinated releases from strategic reserves.

Asian countries have also relied more on the U.S., which recently surpassed Saudi Arabia as the world’s top oil exporter. But that boost largely came from drawdowns of U.S. inventory. Reserves of crude and oil products have dropped by a combined 52 million barrels after four consecutive weeks of declines.

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Storage levels will continue to be tested because most U.S. oil producers don’t plan to pump more, even as higher prices offer the potential for big windfalls.

In a survey of oil and gas executives conducted by the Dallas Fed, which covers the prolific Permian Basin, they signaled that supply will not change much due to all the uncertainty weighing on the longer-term outlook.

“Even after nearly a month of oil above $90 per barrel, rig counts declined, signaling little confidence that prices will hold,” one respondent said. “Closing the supply gap from the Iran conflict will require greater certainty and higher 2027 future prices to incentivize additional rig and frack deployments.”

A respondent in the oilfield services sector complained that “Uncertainty is problematic in the oil and gas business, and this administration is the definition of uncertainty.” A peer echoed that remark, saying “The unpredictable nature of the current administration makes business modeling near impossible.”

Without a surge in new supply and with stockpiles running low, top oil analysts have warned that global markets are about to head off a cliff.

Paul Sankey, president of Sankey Research, recently guaranteed that the next few months “will be an ongoing, absolute disaster” even if the Strait of Hormuz reopens immediately.

Gulf states like Kuwait and Iraq that don’t have easy bypasses around the Strait of Hormuz also risk long-term damage to their oil capacity as production has been shut in during the war and may not be able to ramp up quickly.

Amrita Sen, founder of consultancy Energy Aspects, predicted stockpiles will be exhausted by the end of June if the war drags on. By that point, pricing will be completely out of whack.

“Essentially you can pick a number when it comes to the oil price,” she told the Financial Times. “We will just not have any buffers.”

Despite the doomsday warnings, U.S. stocks surged to new highs over the past week, buoyed by strong earnings reports and momentum from the AI boom.

But on Friday, Exxon Mobil CEO Darren Woods sounded the alarm that markets still don’t realize the magnitude of what could be just around the corner.

“It’s obvious to most that if you look at the unprecedented disruption in the world supply of oil and natural gas, the market hasn’t seen the full impact of that yet,” he told CNBC. “There’s more to come if the strait remains closed.”

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