JPMorgan Sees No Clear Endgame for Oil Markets Amid Iran Conflict

JPMorgan's analysts are struggling to predict the impact of the ongoing Iran conflict on oil markets. The bank estimates that Brent crude's fair value is around $90 a barrel for September, but prices have climbed above $106. This suggests that the market is factoring in further supply losses beyond the estimated 10 million barrels per day already disrupted.

The analysts note that economic thresholds they initially expected the US administration not to cross had been breached six months into the conflict without a clear exit strategy. Oil prices have surged, with Brent averaging $94 a barrel since the conflict began. Weaker demand has helped the market absorb significant supply losses, but global oil demand has been around 4.4 million barrels per day below year-ago levels.

JPMorgan warns that a prolonged disruption to Middle Eastern supplies could push prices higher later this year as inventories decline further and the market becomes increasingly dependent on demand destruction to remain balanced.