No Clear Oil Market Endgame, Says JPMorgan As Iran Conflict Escalates

JPMorgan has said it no longer has a clear baseline view for global oil markets, for the first time since the US-Israel war on Iran began, warning that six months into the conflict, there is still no visible exit strategy.

"We simply don't know how to model the endgame," analysts at the bank said in a note issued on Thursday, Reuters reported.

The note said that at the start of the conflict, JPMorgan had assumed certain economic thresholds the US administration would not cross, but that many of those lines have since been crossed.

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The bank noted that oil prices have climbed above $100 a barrel, with US gasoline at $4.37 a gallon and diesel at an all-time high of $6.31 a gallon heading into winter, the period of peak seasonal demand, even as inventories sit at record lows.

JPMorgan estimated Brent's fair value at around $90 a barrel for September, against the current prices near $106, suggesting markets are pricing in the risk of further supply losses beyond the roughly 10 million barrels per day already disrupted.

The note flagged mounting risks across the Middle East, including threats to shipping through the Bab el-Mandeb Strait and recent attacks on Saudi export routes, alongside continued strikes on Russian refining infrastructure and Ukrainian cities.

Despite the scale of the disruption, oil prices have not risen as sharply as expected, JPMorgan said, because governments and consumers have relied less on drawing down inventories than anticipated.

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Global inventories of crude and refined products have fallen by about 555 million barrels since the conflict began, only around a third of the decline the bank had earlier projected, while global oil demand has run about 4.4 million barrels per day, below year-ago levels.

"By leaning much more on demand destruction and much less on stock draws, the market has been able to absorb an extraordinary supply disruption without a sustained rise in crude prices. Since the conflict began, Brent has averaged just $94," the bank said.

The International Energy Agency said last week that global oil supply and demand were set to fall further. OPEC, by contrast, still expects demand to grow in 2026, forecasting a rise of 380,000 barrels per day, even after lowering its outlook for a fifth straight month.

JPMorgan said sizeable inventories remain in China, Europe, Japan and South Korea, offering a buffer against prolonged disruption, though it cautioned that prices could move higher later this year if Middle East supply disruptions persist. "In short, there is still enough dry powder to keep prices contained — for now," the bank said.

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