UBS Group AG's latest research warns that if the blockade of the Strait of Hormuz persists, global crude oil and refined product inventories could fall to historic lows by the end of April. Under such conditions, Brent crude prices may climb above $150 per barrel, with further upside risks. Tensions involving Iran showed no signs of easing over the weekend. U.S. forces struck military facilities on Iran's key oil export hub, Hormuz Island, on Friday night. This terminal handles approximately 90% of Iran's crude exports. Subsequently, the UAE's Fujairah terminal was attacked by drones on Saturday, reportedly damaging two crude storage tanks and temporarily halting operations, though activities resumed by Sunday. U.S. Energy Secretary Chris Wright indicated the conflict could continue for several more weeks. According to trading desk sources, UBS analyst Arend Kapteyn estimated in a report dated the 16th that even with combined efforts—including utilizing Saudi pipelines (5 million barrels per day), UAE pipelines (0.5 million bpd), ongoing Iranian exports (1.7 million bpd), and the release of strategic reserves by the Infrastructure and Energy Alternatives, Inc. (IEA) (approximately 3.3 to 4 million bpd)—these measures would only compensate for about half of the supply loss caused by a de facto blockade of the Strait. The remaining shortfall would still be around 10 million bpd. At the current rate of inventory drawdown, global oil inventories are projected to fall into the lower third of their historical range by the end of March and could reach record lows by the end of April. For investors, low inventory levels imply that oil prices will exhibit significant convexity—meaning price sensitivity to supply shocks would far exceed historical averages. UBS conservatively estimates that if the Strait situation does not substantially improve by the end of March, Brent crude could rise to around $120 per barrel, advancing further above $150 in the second quarter. A scenario of $160 per barrel remains within the bank's modeled possibilities until clear signs of demand destruction emerge.

The supply gap remains difficult to close, with approximately 10 million bpd still unaccounted for. The Strait of Hormuz normally handles about 20.5 million bpd of oil and gas flows. A substantial blockade would cause massive supply losses that existing alternative routes and policy tools cannot fully offset. UBS outlined currently available alternative supplies: Saudi Arabia's land-based pipelines bypassing the Strait can transport 5 million bpd; the UAE's Fujairah bypass pipeline can provide 0.5 million bpd; some Iranian exports continue (1.7 million bpd); and IEA strategic reserve releases are expected to provide about 3.3 to 4 million bpd. Even if all these measures are fully implemented, the total additional supply would only be about 10.5 million bpd, leaving a gap of roughly 10 million bpd that must be filled by rapidly drawing down global inventories. Notably, the Fujairah terminal itself has already been impacted in the recent conflict, casting uncertainty on the reliability of its operations and the actual supply capacity of the UAE bypass pipeline.

Strategic reserves are being released faster, but the time window is limited. Another report from UBS analyst Henri Patricot, also dated the 16th, indicated that the IEA disclosed further details on March 15 regarding its member countries' emergency oil reserve release plan. The total volume amounts to 400 million barrels, with a planned flow rate of nearly 4 million bpd. However, the buffering effect of this volume remains limited, and there are noticeable implementation lags. According to the IEA, crude oil constitutes 72% of the release, while refined products make up 28%. Asian member countries will bear about 25% of the total release volume and can execute immediately; however, logistical flows from American and European members will not be fully operational until late March. The U.S. plans to release 172 million barrels of strategic petroleum reserves at a rate of about 1.4 million bpd, while Japan's release rate is approximately 1.8 million bpd. Even using the IEA's latest estimate of about 4 million bpd, strategic reserve releases would only fill about 30% of the total supply loss from a full Strait blockade, insufficient to fundamentally reverse the inventory draw trend. Moreover, global inventory distribution is highly uneven. Data show that many low-income oil-consuming countries in Asia have inventory coverage days far below the global average. If supply constraints persist, these nations will be the first to reach critical levels. UBS notes this significantly increases the probability of panic buying—countries scrambling to secure supplies before their own stocks are depleted, further amplifying demand-side pressure on prices.

Inventory drawdown accelerates, likely falling to historically low levels by end-March. Under the impact of a sustained supply shortfall of about 10 million bpd, the rate of global oil inventory depletion has accelerated markedly. UBS estimates, based on historical data, that at the current pace, global crude and product inventories will drop into the lower third of their historical distribution by the end of March and may hit record lows by the end of April. In absolute terms, current global observed inventories (including OECD, non-OECD stocks, and oil in transit) total approximately 9,000 to 9,300 million barrels. UBS scenario modeling indicates that if transit through the Strait remains restricted throughout March, inventories will rapidly approach historic lows. OECD industrial inventory data also show clear downward pressure. According to the IEA's February 2026 monthly report, current OECD inventories are already below the rolling five-year average, indicating that supply tightness existed even before the recent conflict.

Price convexity in a low-inventory environment: $160 per barrel scenario is not an extreme assumption. There is a historically documented nonlinear relationship between oil prices and global inventories: when stocks fall into historically low ranges, prices react much more sharply to further supply contractions. This is the "price convexity" effect emphasized by UBS. According to UBS modeling, under a prolonged Strait of Hormuz blockade scenario, the projected path for Brent crude is as follows: reaching around $120 per barrel by the end of March, and rising above $150 per barrel by the end of April. If clear demand destruction signals remain absent by then, a scenario of $160 per barrel is realistically possible and has been included in UBS's scenario range.