JPMorgan commodities strategists, led by Natasha Kaneva, have stated that they lack a baseline view for energy markets and "simply don't know how to model the endgame" of the ongoing Iran war. Six months into the conflict, which has been complex, costly, and unpopular, oil prices are trading above $100 per barrel for both international benchmark Brent crude and US benchmark WTI. US gasoline is holding above $4 per gallon, and diesel prices have reached all-time highs above $6 per gallon, while the 10-year Treasury yield has surpassed 5%.
The Strait of Hormuz, a critical chokepoint for global energy flows, remains largely closed to through traffic, with daily crossings significantly reduced from an average of over 120 to low double digits. Initially, analysts assumed there were economic "red lines" the US administration would not cross, but these have been exceeded without a clearer exit strategy for the conflict. JPMorgan's previous forecast for a substantial drawdown in global oil stocks (1.4 billion to 1.6 billion barrels) did not materialize; instead, stocks have decreased by only 555 million barrels, about one-third of the initial projection.
The market has responded primarily through demand destruction rather than relying on stock draws. Since March, global oil demand has been more than 4 million barrels per day below last year's levels. This curb in demand has allowed the market to absorb significant supply disruption without a sustained rise in crude prices. However, the assumption that Middle East disruptions are temporary is becoming increasingly difficult to maintain. While current indicators may not be "flashing red," analysts warn against complacency, suggesting there is still "enough dry powder to keep prices contained — for now."
Despite the current volatility, JPMorgan's research suggests that even if the conflict and Strait of Hormuz constraints persist through 2027, Brent crude may average only around $87 per barrel, making it difficult to sustain prices above $100 long-term. This is due to accelerated production increases from non-Middle East regions and reduced fuel consumption by businesses and households, leading to a global oil demand fall of approximately 5 million barrels per day year-over-year. If the conflict ends, JPMorgan projects a return to a supply surplus of approximately 3.4 million barrels per day in 2027, with Brent averaging around $64. This contrasts with Goldman Sachs' more hawkish view, which suggests oil prices could rise to $120 per barrel if maritime trade disruptions intensify.
