Iran-Israel Conflict: JPMorgan Anticipates $120 Oil Spike, Maintains $60 Base Case For 2025-26
Major players in the Middle East have strong incentives to keep the conflict contained, JPMorgan said.
Israel has launched airstrikes targeting Iran's nuclear facilities, significantly escalating the standoff over Tehran's atomic programme. The development has sent shockwaves through global markets, with oil prices surging by as much as 9.3% on heightened security risks in the Middle East.
Prior to this, JPMorgan in its latest Global Commodities Research report, released on June 12, had already indicated a 7% probability of a worst-case scenario impacting oil supply.
"Prices reflect a 7% probability of a worst-case scenario, where supply impact extends beyond the reduction in Iranian exports and price reaction is exponential rather than linear." This prediction has now materialised with the recent airstrikes, pushing oil prices higher.
"An attack on Iran could spike oil prices to $120, driving US CPI to 5%," the brokerage said. But JPMorgan has also downplayed the likelihood of the closure of the Strait of Hormuz, noting that "Iran would be damaging its own position, both economically and politically, by irritating its main customer."
However, as tensions continued to rise, the global oil market remained volatile. JPMorgan maintained its base case for oil prices in the low-to-mid $60s for the rest of 2025 and $60 in 2026, despite the current upheaval. However, the possibility of further escalation could lead to unpredictable price movements in the coming months.
The report emphasised that major players in the Middle East had strong incentives to keep the conflict contained. "The economic transformation currently planned and implemented in the Gulf region requires a sustained absence of conflict," the note added.
Meanwhile, the US embassy in Iraq is preparing for evacuation, and the US State Department has announced plans to order non-essential embassy personnel and their families to leave Bahrain and Kuwait. Additionally, the British Navy issued a rare warning to ships in the region, urging caution in the Persian Gulf, the Gulf of Oman, and the Strait of Hormuz, the report said.
