JP Morgan says it has no clear oil market endgame as Iran conflict drags on

• Brent crude trading near $106 per barrel versus JP Morgan's estimated fair value of $90, with markets pricing in risks of further supply losses beyond the 10 million bpd already disrupted
• Global oil demand has fallen 4.4 million bpd below year-ago levels, while inventory drawdowns of 555 million barrels are only one-third of JP Morgan's earlier projections, helping contain price increases through demand destruction rather than stock draws
• Significant inventories remain available in China, Europe, Japan and South Korea as a buffer, but JP Morgan warns prices could rise later in 2026 if Middle East disruptions persist and inventories decline further

JP Morgan Uncertainty on Oil Markets Amid Iran Conflict

JP Morgan announced Thursday it has no clear baseline view for oil markets for the first time since the US-Israeli war on Iran began, stating analysts "simply don't know how to model the endgame." Six months into the conflict, the bank notes that previously assumed economic thresholds have been crossed with no exit strategy visible.

Key Price Levels and Figures

• Brent crude: Currently trading near $106/barrel vs. JP Morgan's fair value estimate of $90/barrel for September
• US gasoline: $4.37/gallon
• US diesel: All-time high of $6.31/gallon heading into peak winter demand
• Supply disruptions: Estimated 10 million barrels per day already offline
• Current Brent average since conflict began: $94/barrel

Supply and Demand Dynamics

Global oil inventories have declined by approximately 555 million barrels since the conflict started—only one-third of JP Morgan's earlier projection. This smaller-than-expected drawdown reflects significant demand destruction, with global oil demand running 4.4 million bpd below year-ago levels.

The market has absorbed extraordinary supply disruptions through demand destruction rather than inventory drawdowns, preventing sustained price spikes.

Geopolitical Risks

Mounting concerns include threats to shipping through the Bab el-Mandeb Strait, attacks on Saudi export routes, and continued strikes on Russian refining infrastructure. Markets are pricing in risks of further supply losses beyond current disruptions.

Outlook

JP Morgan notes significant inventories remain available in China, Europe, Japan, and South Korea, providing a buffer that could contain prices near-term. However, the bank warns that if Middle East disruptions persist, prices could rise later this year as inventories decline further and markets become increasingly dependent on demand destruction for balance.