JPMorgan says it no longer has a clear baseline forecast for the global oil market as the Iran conflict enters its sixth month.
The bank said supply risks are increasing across the Middle East and other major oil-producing regions.
JPMorgan Struggles to Model the War’s End
JPMorgan analysts said the bank does not know how the conflict will end or how to model its impact on oil markets.
The bank had initially expected economic pressures to limit the escalation.
However, several of those expected limits have now been crossed without a clear exit strategy.
Oil Prices Move Above $100
Oil prices have climbed above $100 per barrel during the prolonged conflict.
JPMorgan estimated Brent crude’s fair value at around $90 per barrel for September.
Market prices were near $106 when the bank issued its assessment.
The gap suggests traders are pricing in the possibility of further supply losses.
JPMorgan estimates that around 10 million barrels per day of supply has already been disrupted.
Middle East Supply Risks Increase
The bank highlighted several threats to global energy supplies.
These include risks to shipping through the Bab el-Mandeb Strait and attacks affecting Saudi oil export routes.
JPMorgan also pointed to continued attacks on Russian refining infrastructure and other energy-related targets.
These developments are adding further uncertainty to an already tight global oil market.
Global Oil Inventories Have Fallen
Despite the major supply disruptions, oil prices have not increased as sharply as JPMorgan initially expected.
The bank said governments and consumers have relied less on inventory withdrawals.
Global crude and refined-product inventories have fallen by about 555 million barrels since the conflict began.
That decline is around one-third of the reduction JPMorgan had previously projected.
At the same time, global oil demand has been about 4.4 million barrels per day below year-earlier levels.
Lower demand has helped offset some of the supply losses.
China and Asia Provide Some Buffer
JPMorgan said significant oil inventories remain available in China, Europe, Japan and South Korea.
These stocks could provide a buffer if supply disruptions continue.
The available inventories may reduce the immediate need for oil prices to rise sharply.
However, the bank warned that this protection could weaken if the conflict continues for an extended period.
Prices Could Rise Further
JPMorgan warned that oil prices could move higher later this year if Middle East supply disruptions persist.
Further inventory declines would leave the market increasingly dependent on lower demand to maintain balance.
Recent market movements show the uncertainty remains high.
On September 18, Brent crude fell about 2% to around $102.68 per barrel as concerns over Saudi supply disruptions eased.
JPMorgan said global inventories still provide some protection for now.
But prolonged disruptions could leave the oil market more vulnerable to additional supply shocks.
