Europe’s commercial jet fuel inventories are at risk of falling to dangerously low levels within months if current disruptions to flows through the Strait of Hormuz continue, according to analysis from J.P. Morgan.
The bank modelled replacement scenarios for Middle East-derived jet fuel, noting that present replacement efforts - with the U.S. serving as the primary alternative supplier - have so far replaced roughly 50% of usual Middle East imports. Under that outcome, J.P. Morgan’s scenario shows commercial stock coverage dropping below 20 days by June.
J.P. Morgan describes the sub-20 day mark as critical. At that level, the broker warns of the potential for widespread shortages, particularly in countries that entered the disruption period with inventory levels already below the regional average.
Even if replacement improves to 75% of typical Middle East imports, the analysis still points to a tight supply picture. In that scenario, commercial stock cover would fall under the 20-day threshold by August - coinciding with the peak of aviation demand - and heightening the risk of supply interruptions when fuel consumption typically rises.
The region’s structural exposure is significant. Europe consumes around 1.6 million barrels per day of jet fuel, while net imports account for about 0.5 million barrels per day - more than 30% of total demand. Of those imports, approximately 70% normally come from the Middle East. Prior to the conflict, commercial inventories were modest - below 40 days of cover, or roughly one to one-and-a-half months - with some countries starting with about 20 days of supply.
Redirecting supply is not straightforward. J.P. Morgan highlights technical constraints for aviation-grade fuel, including strict flash and freeze point specifications required for high-altitude use, and limited hydrotreating capacity in Europe. Those factors mean refiners are already operating at or near the maximum practical jet fuel output, with a base-case refinery yield of 8-9% for jet fuel.
"However, jet fuel production is (very) inelastic absent the construction of more refineries...which would be a multi-year undertaking," J.P. Morgan said.
Government strategic reserves could extend the time to shortage. Wood Mackenzie estimates that including governmental strategic stocks would raise Europe’s coverage to about 50-55 days, versus the IEA’s commercial-stock figure of under 40 days. J.P. Morgan cautions that it is unclear to what degree the EU would release strategic reserves for commercial use.
Broader refining economics add to the pressure. In March, complex refining margins in Europe spiked two to three times following the outbreak of hostilities in the Middle East, before easing back toward multi-year averages. Margins for simple hydroskimming refineries have turned negative. At the same time freight rates have roughly tripled and TTF gas prices have risen sharply, widening Europe’s cost disadvantage against U.S. and Asian refiners.
At the company level, J.P. Morgan notes sensitivity metrics: a $1 per barrel annualised shift in refining margins translates into roughly a 3% move in sector earnings per share and about 30 basis points in free cash flow. Repsol is identified as having the highest refining exposure, at a 7% EPS impact per $1/bbl, while Shell and Equinor are among the least exposed. Shell and BP are highlighted for holding the broadest set of refining assets outside Europe.
The bank adds that the European Union is reportedly due to announce policy measures later in the week, but it warns that the real-world supply response is unlikely to follow a linear path as portrayed in scenario models.
Summary
J.P. Morgan’s scenario work shows Europe could see commercial jet fuel stock cover dive below 20 days by June if only half of Middle East flows are replaced. Even with higher replacement rates, the region faces tightness into the peak summer season. Structural import dependence, limited refinery flexibility and modest pre-conflict stocks are central to the vulnerability, while strategic reserves and forthcoming EU policy moves offer uncertain mitigation.