On Saturday March 7, 2026, Kuwait Petroleum Corporation (KPC) formally declared force majeure and began a precautionary reduction in crude production and refinery throughput, becoming the latest OPEC member to be forced into output cuts by the escalating U.S.-Israeli war against Iran.
The announcement follows similar moves by Iraq and Qatar earlier in the week and comes as the Strait of Hormuz—the chokepoint through which roughly 20% of the world’s seaborne crude and a third of global LNG flows—remains effectively paralyzed for an eighth consecutive day.
Key facts from the KPC notice (seen by Reuters):
- Force majeure invoked due to “explicit threats by Iran against the safe passage of ships through the Strait of Hormuz.”
- “Almost total absence” of available tankers willing to enter the Arabian Gulf.
- Ongoing Iranian attacks on Kuwaiti territory and infrastructure.
- Reduction is “precautionary” and will be reviewed daily; restoration possible once safe transit resumes.
Kuwait’s February average production stood at approximately 2.6 million barrels per day. The company has not disclosed the exact volume of the cut, but traders expect an immediate drop of 400–600 kb/d as loading programs are deferred and floating storage fills up.
Why storage is now the binding constraint
Even before Saturday’s announcement, analysts had warned that the UAE and Saudi Arabia would soon follow suit. Both countries have been furiously filling onshore tanks and very large crude carriers (VLCCs) anchored offshore since the strait became too risky for routine loadings.
Current estimates (Argus, Vortexa, Kpler):
- UAE onshore & floating storage approaching 85–90% utilization.
- Saudi Arabia’s Ras Tanura and Ju’aymah terminals nearing tank-top levels.
- Regional floating storage has swelled to ~180 million barrels (highest since the 2020 COVID demand collapse).
Once tanks are full and no vessels are willing to load, production must be curtailed—regardless of price signals. The longer Hormuz remains closed to commercial traffic, the faster the forced shut-ins will cascade across the Gulf.
Market implications – immediate and structural
- Price reaction Brent futures spiked more than 2% on the KPC news, briefly touching $89.20/bbl before paring gains. Asian naphtha cracks and European jet fuel differentials are at multi-year highs as Kuwaiti exports to those markets dry up.
- Global supply shock If the UAE and Saudi Arabia are forced to cut 1.5–2.5 mb/d combined in the coming 7–14 days, the market will lose roughly 3–4 mb/d of medium-sour crude and heavy fuel oil components at a stroke—the largest single-event supply disruption since the 1990–91 Gulf War.
- Downstream pain Asia (top buyer of Kuwaiti crude & naphtha) and Northwest Europe (major Kuwaiti jet-fuel destination) face acute product shortages. Refinery runs in Singapore, South Korea and the ARA region are already being curtailed.
- OPEC+ cohesion under strain The group’s spare capacity—estimated at 5.2 mb/d in February—is rapidly being eaten up by forced shut-ins rather than coordinated policy. If Saudi Arabia and the UAE begin involuntary cuts, the credibility of the “whatever it takes” production stance will be severely tested.
The bigger strategic picture
Kuwait’s force majeure declaration is not merely a commercial event; it is a loud signal that the Strait of Hormuz is no longer a commercial waterway. Iran has demonstrated it can impose de-facto closure through a combination of direct threats, drone/mines risks, and attacks on Gulf infrastructure—without needing to sink a single tanker.
Until a credible de-escalation path emerges (diplomatic or military), the market must price in the possibility that 15–18 mb/d of Gulf crude and condensate production (≈15% of global supply) could be offline or severely constrained for weeks or months.
The “war of billions”https://worldnabd.com/war-of-billions-the-staggering-daily-cost-of-the-iran-conflict-for-the-us-and-israel/ has now become a war of storage tanks—and the tanks are filling fast.
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