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JPMorgan’s commodities research team led by Natasha Kaneva issued a note conceding that for the first time since the Iran conflict began in late February the bank lacks any baseline scenario for oil prices. “We simply don’t know how to model the endgame,” the analysts stated according to a report by Reuters. The note explained that at the start of hostilities JPMorgan had assumed certain economic red lines would prompt the Trump administration to reach a deal reopening the Strait of Hormuz by June.
Those thresholds included Brent crude rising above 100 dollars a barrel, inflation hitting 4 percent, gasoline prices exceeding 5 dollars a gallon and 10-year Treasury yields reaching 5 percent, according to the JPMorgan assessment. Six months later many of those lines have been crossed while an exit strategy has grown less clear, the bank’s team reported. Current oil prices trade near 106 dollars a barrel with US diesel reaching a record 6.31 dollars a gallon heading into peak winter demand and inventories at historic lows, the note detailed.
JPMorgan estimated the fair value for Brent in September at around 90 dollars a barrel even as the market trades well above that level, suggesting participants are pricing in risks of further supply losses beyond the roughly 10 million barrels per day already disrupted. The analysts cited no clear signals of de-escalation from Washington or Tehran with a planned September 24 meeting between President Trump and President Xi viewed as offering only modest prospects for a breakthrough. Additional risks include threats to shipping through the Bab el-Mandeb Strait, attacks on Saudi export infrastructure and continued strikes on Russian refining capacity, according to the JPMorgan note.
Global inventories of crude and refined products have declined by about 555 million barrels since the conflict started, amounting to only one-third of the drawdown JPMorgan had earlier projected. Global oil demand meanwhile has run 4.4 million barrels per day below year-ago levels, enabling the market to balance largely through demand destruction rather than inventory depletion, the bank calculated. Brent has averaged just 94 dollars a barrel since the fighting erupted, the note showed.
The US Energy Information Administration forecast in its September short-term energy outlook that Brent crude would average 91 dollars per barrel for the remainder of 2026 before easing to 74 dollars in 2027 as production increases and inventories begin to rebuild. The EIA attributed elevated prices to a 400-million-barrel inventory decline so far this year together with renewed US sanctions on Iranian exports following tanker attacks in the Strait of Hormuz. The agency expects inventories to continue falling through year-end, supporting prices near recent monthly averages in coming months.
Goldman Sachs had projected earlier in the year that oil prices could grind lower following interim ceasefires, anticipating a Brent average near 75 dollars in 2027 under conditions of normalized supply flows. The International Energy Agency separately revised its global supply and demand projections downward for 2026, reflecting persistent disruptions from the conflict according to industry reports. Multiple banks have echoed JPMorgan’s caution about forecasting accuracy amid ongoing geopolitical volatility in the Middle East.
Significant commercial inventories remain available in China, Europe, Japan and South Korea, providing a buffer that could limit near-term price spikes even if Middle East flows stay constrained, JPMorgan noted. The bank cautioned however that prolonged disruptions would force greater reliance on demand destruction as inventories tighten further later this year. OPEC has projected demand growth of 380,000 barrels per day in 2026, a figure that could shift depending on how the conflict evolves, according to the latest assessments from the producer group.
