Timing The Global Oil Shockwave Spread: JPMorgan's "Must See" Map Of The Iran War Fallout

Four weeks ago, just as the Iran war broke out and WTI was still trading well below $80, JPMorgan's commodity analyst Natasha Kaneva was the first to warn that the first big risk to oil prices were the accumulating shut-ins of oil production among Gulf Producers as the inability to move new product meant storage facilities would quickly fill, forcing production to be shut, a process which could take weeks if not months to undo. Well, with the war now in day 27, we are effectively there, with much of Gulf shut-ins now implemented and limiting maximum output for the foreseeable future even if the Strait were to reopen tomorrow. 

But another, even bigger risk looms now, and it has to do with oil already on boats arriving at its destination, after which point a far greater commodity shock looms: one where the recipients enter panic mode, scrambling to procure any oil shipments from anywhere in the world, potentially pushing prices much higher.

But when and where should one expect this shockwave to arrive? 

That's what Kaneva analyzes in her latest must read note (available to pro subs), which we discuss below. 

As Kaneva writes, with the last tanker departing the Strait of Hormuz on February 28, the global system is shifting from a flow shock to a stock depletion problem, where timing - not just volumes - drives the impact. Voyage times set the clock: cargoes from the Gulf reach Asia in roughly 10-20 days, arriving first in India and later in Northeast Asia. Europe and Africa follow, with transit times of about 20-35 days, while the US Gulf Coast sits at the far end of the chain at roughly 35-45 days.

Much like during COVID, the shock unfolds sequentially rather than simultaneously—a rolling supply disruption moving westward, dictated by shipping times and buffered unevenly by regional inventories. The chronological nature of the coming shockwave is shown in the following key chart from JPMorgan:

This means Asia — heavily reliant on Gulf crude and products, and which we noted is already suffering extensive demand destruction — is already feeling the squeeze as pre-closure cargoes have largely dried up. In April, Southeast Asia’s demand is expected to fall by about 300 kbd, but losses could climb rapidly— surpassing 2 mbd in May and approaching 3 mbd by June — if OECD stock releases remain contained within their respective countries.

Africa is next, with effects becoming more pronounced in early April, though outcomes will vary widely depending on local stock levels and import dependency. Up to 250 kbd of demand losses are possible in April if inland stocks are low.

Europe is likely to feel the impact by mid-April, as the last February loadings arrive without replacement, but the shock is shaped more by rising costs and competition with Asia than by outright shortages. Higher inventories and alternative Atlantic Basin supplies offer some insulation, yet with about 1.1 mbd of imports at risk and some European gasoline already flowing eastward where margins are more attractive, elevated prices—not physical scarcity—are set to drive demand reduction.

The US is last in line. With longer voyage times and substantial domestic production, direct physical shortages are unlikely in the near term. Instead, the impact will be felt mainly through higher prices and dislocations in refined product markets—especially in California, where Diesel just hit a record $7.00 — rather than outright scarcity.

The shift from a flow shock to stock depletion is already evident in global inventory data: in the first three weeks of March, inventories fell by about 155 million barrels—driven mainly by a 211 million barrel (10 mbd) drop in oil in transit—while onshore inventories have  eemained largely stable.

Crude shortages and logistical constraints are also reflected in a sharp decline in refining runs, down 2.6 mbd since the start of the conflict.

Let's take a closer look at each of these, one at a time.

Asia is the first region to feel the squeeze

Governments across the region have implemented preventive and emergency measures to stretch fuel supplies and cushion price shocks (see Demand destruction has arrived). The following table from Goldman shows the various demand destruction events, most of which are affecting Asia. 

That said, Asia is no longer in a purely preventive phase. While policy responses continue to focus on mitigating the shock, early signs of physical tightening are already apparent. Regional exporters are increasingly prioritizing domestic markets, and intra-Asian trade flows have started to contract. In effect, March has been characterized by preventive measures and efforts to cushion price impacts, but April is likely to bring the first visible demand losses as supply constraints translate into reduced availability and declining inventories.

According to JPMorgan: 

• Southeast Asia’s demand reduction is estimated at around 300 kbd in April, but this figure rises sharply in the following months.
• If OECD stock releases remain local and replacement flows to Asia are limited, demand losses could exceed 2 mbd in May and approach 3 mbd by June.
• While some cargoes passing through Hormuz may provide limited relief, the primary challenge has shifted from price to physical scarcity. Oil exports to Southeast Asia fell 41% MoM and YoY on a 4-week averaged

Africa follows next

In some cases, the impact may be felt in Africa more quickly than in Europe due to shorter shipping times from the Gulf. East Africa is particularly vulnerable to disruptions in refined-product flows from the Middle East and Asia. Early signs of stress are emerging: Kenya is already experiencing fuel shortages at the retail level, while Tanzania still maintains adequate stocks. In South Africa, current pressures stem more from pre-buying and price expectations than from actual shortages, although jet fuel inventories remain limited. Oil exports to the four African countries most dependent on Hormuz fell 43% MoM and 45% YoY on a 4-week average.

This suggests Africa is transitioning from a precautionary phase to one of physical risk, with conditions varying by country. Kenya appears to be entering an early shortage phase, while others remain temporarily insulated. Given limited visibility on inland inventories, we estimate that if stocks are low, fuel shortages could already be causing demand losses of up to 250 kbd in April, with approximately 700 kbd of imports at risk due to disruptions in Gulf and Asian supply chains.

Europe is likely to feel the impact by mid-April, but the nature of the shock is different

The region continues to benefit from a meaningful inventory buffer and the ongoing arrival of cargoes loaded before the disruption. However, the replacement chain is weakening: new product flows from the Middle East have slowed significantly, imports of key fuels such as jet are declining, and prices have surged to extreme levels

At the same time, some European gasoline barrels are already being redirected to Asia, where margins are more attractive. As a result, Europe is contending with price and allocation challenges rather than outright fuel shortages. Although approximately 1.1 mbd of imports are at risk, inventories remain sufficient to bridge the gap for an extended period. The primary impact is higher replacement costs and intensified competition with Asia. In this environment, demand reduction in Europe is likely to be driven by elevated prices rather than physical shortages.

The United States is last in line

The West Coast - especially California - is the most exposed region in the US. California, which is structurally isolated from the broader US fuel system, relies heavily on imports from Latin America, Canada, Asia, and the Middle East, and its refineries are optimized for heavier crude.

As flows from the Middle East and Asia begin to decline after mid-April, the primary challenge shifts from immediate scarcity to securing  adequate replacements. Alternatives are limited: Canadian heavy crude supplies are tight, Venezuelan barrels remain constrained and contested, and redirecting flows from the US Gulf Coast is logistically complex and competes with domestic demand. While recent regulatory flexibility may provide some relief at the margins, it does not resolve the underlying imbalance.

As a result, the US will initially experience a price shock, but for the West Coast, this is likely to evolve into a physical supply challenge by late April and May, as replacement options dwindle and competition for suitable crude intensifies.

The shift from a flow shock to a stock depletion is already evident in global inventory data

During the first three weeks of March, global inventories fell by approximately 155 million barrels—one of the largest drawdowns on record. Notably, this decline is almost entirely attributable to a sharp contraction in oil in transit, which dropped by roughly 211 million barrels or 10 mbd.

In contrast, onshore inventories have remained relatively stable for now, offering a temporary buffer against immediate shortages. Regional drawdowns are apparent but still manageable: China’s inventories have declined by about 19 million barrels (1 mbd), Japan’s by around 13 million barrels (likely understated due to missing product data), and India’s by approximately 10 million barrels (0.5 mbd).

At the same time, the first operational response is already visible in refining activity. Although some limited capacity is coming back online in the Middle East, JPM is tracking 2.0 mbd of unplanned shut-ins in the region due to physical damage or precautionary closure . Citing crude shortages, Asian refineries have expanded unplanned cuts to 1.0 mbd including 300 kbd from pre-conflict levels, with 770 kbd in China, 130 kbd in Japan and 90 kbd in Malaysia. For now, we see little deviation in unplanned shut-ins in Europe and the Americas from pre-conflict levels.

Overall, the current phase of the disruption remains transitional. The system is still relying on existing buffers, but this adjustment is inherently limited. As stranded barrels fail to reach end markets and inland inventories begin to decline more significantly, the impact is expected to spread beyond Asia, propagating across Africa, Europe, and ultimately the United States—following the physical timeline set by shipping routes.

More in the full JPMorgan note available to pro subscribers.