Overview
Morgan Stanley's oil strategists estimate that reopening the Strait of Hormuz would lead to a substantial restoration of Middle East oil output, with about 75% of production returning over a four-month period. The bank's note anticipates a material shift in exports beginning in late July, followed by a phased recovery during the subsequent months.
How the recovery would unfold
According to the research note, the rebound would not be instantaneous. The firm expects export flows through the strait to pick up from late July and for roughly three-quarters of the displaced production to be reinstated over the following four months. This projection assumes a sequence of operational steps and confidence-building measures that must take place before shipping and insurance markets will support a sustained resumption of traffic.
Operational and logistical hurdles
Morgan Stanley lists several specific impediments that would need to be addressed before the market can return to normal conditions. These include clearing mines from shipping lanes, working through tanker backlogs that accumulated while the strait was closed, alleviating pressure on storage facilities that filled during the disruption, and restarting oil fields that were idled or scaled back. Each of these elements is presented as a necessary part of the recovery timeline rather than an immediate fix.
Role of shipowners and insurers
The bank underscores that shipowners and insurance providers must regain confidence in the safety of transiting the Strait before normal operations can resume. Restored willingness from both groups to underwrite voyages and deploy tonnage is framed as a precondition for export volumes to return to pre-disruption patterns.
Market outlook
While projecting a significant portion of production could return within four months, Morgan Stanley cautions that the oil market is likely to remain tight during the third quarter as the identified bottlenecks are resolved. The note indicates the timing and pace of normalisation will depend on successful execution of the mine clearance, backlog reduction, storage relief and field restarts described above.
Conclusion
The bank's view presents a path to substantial output recovery contingent on a set of operational tasks and renewed confidence among maritime participants. Until those conditions are met, Morgan Stanley expects constrained market conditions to persist through the third quarter.