Oil markets recorded one of their most extreme weeks in recent memory as Brent crude touched $91.89 per barrel — the highest since April 2024 — following Kuwait’s announcement that it was cutting production at fields with no remaining storage capacity. The development, coming against the backdrop of the Iran conflict that has already driven prices more than 25% higher in a week, has raised the prospect of a cascading production shutdown across the Gulf.
The storage problem at the heart of this crisis is both simple and terrifying in its implications. With the Strait of Hormuz effectively closed to normal tanker traffic due to Iran’s threats and vessel attacks, oil produced in the Gulf cannot reach its buyers. It therefore accumulates in onshore storage facilities, which are now filling at a rapid pace. Kuwait was first to feel the pressure; Saudi Arabia and the UAE are expected to follow within 20 days.
The knock-on effects of forced production shutdowns would be severe and lasting. Oil wells are not like light switches — shutting them down and restarting them requires significant technical work and capital investment, typically taking weeks to accomplish. This means that a shutdown forced by today’s storage crisis could keep production offline well past any resolution of the conflict, extending the supply shock and keeping prices elevated for months.
Qatar’s energy minister delivered the most sobering assessment of the week. Continued conflict, he said, would force all Gulf exporters to stop production within weeks and push oil to $150 a barrel. Qatar itself has already suffered significant LNG infrastructure damage from a drone attack, and even a ceasefire would leave its gas exports offline for weeks or months. Europe, already paying three-year-high gas prices, is watching the situation with growing alarm.
Markets around the world priced in the darkening outlook with widespread losses. Asia-Pacific stocks had their worst week since the pandemic, European and UK indices fell more than 5%, and bond yields surged. Interest rate cut expectations were abandoned. Airlines, facing potentially crippling fuel cost increases, saw their stocks fall sharply. IAG dropped more than 12% and Wizz Air lost nearly a fifth of its value.
Oil at $91 Sets Off Global Alarm as Kuwait Cuts Output and Gulf Teeters
