JPMorgan drops Iran war oil forecast as redlines are crossed

JPMorgan Chase said Thursday that its commodities analysts have abandoned any working baseline for oil, marking the first time the bank has publicly conceded it cannot chart the conflict’s trajectory since fighting began, according to Reuters.

“For the first time since the start of the Iran conflict, we don’t have a baseline view,” said Natasha Kaneva, head of global commodities strategy at JPMorgan, in a note published Thursday. “We simply don’t know how to model the endgame.”

When the conflict began, JPMorgan expected that a specific set of economic breaking points — crude crossing $100 a barrel, pump prices approaching $5 a gallon, and the 10-year Treasury yield topping 5% — would compel the Trump administration to broker a deal reopening the Strait of Hormuz, according to CNBC. Six months into the conflict, all of those lines have been crossed, Natasha Kaneva said. “The exit strategy is less clear, not more.”

Oil is now trading near $106 a barrel, while diesel prices have set a record at $6.31 a gallon, arriving at that mark just as seasonal demand peaks and stockpiles sit near historic lows. JPMorgan puts Brent’s fair value at roughly $90 a barrel for September, and the roughly $16 gap between that figure and current prices suggests traders are factoring in the potential loss of an additional 4 million barrels per day beyond the 10 million barrels per day already off the market.

Recent developments have added to the uncertainty. Saudi Arabia’s East-West pipeline went offline after a drone strike originating in Iraq left it damaged, according to CNBC. Iran-allied Houthi militants have also made advances that could tighten their control over tanker traffic in the southern Red Sea. Trump told Axios on Thursday that he is weighing a major decision: whether to resume large-scale military operations against Iran or bring the war to a close.

Despite the scale of the supply disruption, oil prices have not surged as sharply as initially feared. Combined crude and refined-product stocks have dropped around 555 million barrels over the course of the war, a drawdown that amounts to only about a third of what the bank had originally forecast. Demand also came in roughly 4.4 million barrels per day lower than the same period last year, cushioning the blow from reduced supply. The bank wrote that the market had managed to take on a historic shortfall by drawing far more on weakened consumption than on stored supplies, keeping crude from mounting a durable rally. Brent has averaged $94 a barrel since the conflict began.

Significant reserves remain available in China, Europe, Japan, and South Korea, the bank noted, which could limit the near-term need for prices to rise further. JPMorgan warned, however, that a continuation of the Middle East outages could push prices upward in the months ahead, particularly as reserve stockpiles thin out and curtailed consumption shoulders more of the burden of keeping supply and demand in check. “In short, there is still enough dry powder to keep prices contained — for now,” Natasha Kaneva said.

The International Energy Agency last week cut its global oil supply and demand forecasts for 2026, warning that stalled diplomatic talks and renewed attacks on shipping lanes are pushing the market toward a deeper shortfall than previously estimated. The IEA projected world oil supply would fall by 5.7 million barrels per day this year, the steepest full-year contraction since the Covid-19 pandemic. U.S. diesel prices crossed $6 a gallon for the first time earlier this month, according to AAA data cited by the IEA.

Treasury Secretary Scott Bessent has been defending the administration’s Iran war strategy before Congress this week, describing it as “the greatest economic isolation campaign in the history of the world.” Democrats pressed Bessent on rising energy costs, with the consumer price index running 3.4% above year-ago levels and the average pump price at $4.32 a gallon as of Monday.