Kuwait and UAE May Follow Iraq in Oil Production Cuts Amid Strait of Hormuz Crisis

Analysts warn that Kuwait and the United Arab Emirates could be the next countries forced to slash their oil production due to the ongoing crisis involving Iran. This follows Iraq's recent decision to cut output after disruptions to shipping through the critical Strait of Hormuz.

The vital waterway, which handles about one-fifth of global seaborne crude oil and liquefied natural gas shipments, has seen maritime traffic grind nearly to a halt. The standstill follows a series of attacks by Iran on six vessels since the crisis began, creating severe logistical and financial hurdles for shippers.

Iraq was forced to reduce its production by almost 1.5 million barrels per day earlier this week. With no significant domestic storage capacity, analysts project that Iraq's cuts could deepen to over 3 million barrels per day within days if the export blockage persists.

The pressure is now mounting on other regional producers. According to a recent JPMorgan analysis, Kuwait has the capacity to store its produced oil for only about 18 more days, while the UAE can hold out for approximately 22 days. Once these storage limits are reached, both nations would have no choice but to follow Iraq's lead and curtail their own production.

Shipping data from firms Vortexa and Kpler indicates the scale of the disruption, with roughly 300 oil tankers currently stranded and unable to transit the strait.

Although the Strait of Hormuz remains technically open, practical passage has become prohibitively expensive. Insurance companies have dramatically increased premiums for vessels entering the zone since the conflict escalated, with some underwriters refusing coverage altogether. This has rendered transit economically unviable for most carriers.

In a recent interview with NBC News, Iranian Foreign Minister Abbas Araghchi stated that Tehran currently has "no intention of closing the Strait of Hormuz." However, he acknowledged that all possible scenarios are being considered amid the ongoing war.