- JPMorgan says it has no clear baseline for oil markets as prolonged conflict keeps global supply risks elevated.
- Global inventories have fallen by about 555 million barrels, while weaker oil demand has helped absorb major supply disruptions.
JPMorgan said it has no clear baseline view for oil markets as the US-Israeli conflict with Iran enters its sixth month, citing uncertainty over how the conflict could end.
“We simply don’t know how to model the endgame,” analysts at the bank said in a September 17 note.
At the start of the conflict, JPMorgan assumed US policymakers would avoid crossing certain economic thresholds. However, the bank said several of those thresholds have since been crossed without a clear exit strategy.
Meanwhile, oil prices have climbed above $100 a barrel, while US gasoline prices reached $4.37 per gallon. US diesel prices also reached a record $6.31 per gallon ahead of winter, when seasonal demand typically increases.
JPMorgan estimates Brent crude’s fair value at about $90 a barrel for September, compared with market prices near $106. The difference indicates that markets continue to price risks of additional supply losses beyond the estimated 10 million barrels per day already disrupted.
The bank also identified growing risks across the Middle East. These include threats to shipping through the Bab el-Mandeb Strait and attacks affecting Saudi export routes. Additionally, continued attacks on Russian refining infrastructure and Ukrainian cities have maintained geopolitical pressure on global energy supplies.
However, oil prices have not increased as sharply as the scale of supply disruptions might suggest. JPMorgan attributed that resilience partly to lower reliance on inventory withdrawals and weaker global demand. Global crude and refined-product inventories have declined by about 555 million barrels since the conflict began. However, that decline represents only about one-third of the drawdown JPMorgan had previously projected.
At the same time, global oil demand has averaged about 4.4 million barrels per day below year-earlier levels. The decline has helped offset part of the supply disruption.
“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,” JPMorgan said. “Since the conflict began, Brent has averaged just $94.”
The International Energy Agency also expects global oil supply and demand to decline more than previously anticipated this year. By contrast, OPEC still expects global oil demand to grow in 2026, although it has reduced its forecast for the fifth consecutive month. OPEC now expects global oil demand to increase by 380,000 barrels per day in 2026.
Furthermore, JPMorgan said significant inventories remain available in China, Europe, Japan and South Korea. Those stocks could provide a buffer if supply disruptions continue and limit the need for substantially higher crude prices in the near term.
Nevertheless, the bank warned that prolonged Middle East disruptions could push prices higher later this year. Falling inventories could increase the market’s dependence on weaker demand to maintain supply-demand balance.
“In short, there is still enough dry powder to keep prices contained—for now,” JPMorgan said.