JPMorgan Warns Oil Prices Could Surge 115% to 130 Dollars Per Barrel Amid Middle East Tensions

Tensions in the Middle East have been escalating, with JPMorgan warning that oil prices could surge to between 120 and 130 dollars per barrel in the worst-case scenario. This warning comes as geopolitical risks in the region continue to rise, particularly with the ongoing tensions between Israel and Iran. The potential for military conflict in the region has raised concerns about disruptions to oil supply, which could drive up prices significantly.

JPMorgan's analysis suggests that if Israel were to attack Iran's nuclear facilities, the "baseline scenario" would be rendered obsolete. In the event of a larger-scale conflict in the Middle East, leading to the blockade of the Strait of Hormuz, oil prices could experience exponential growth. Under this worst-case scenario, Iran's oil exports could decrease by 2.1 million barrels per day, causing oil prices to spike to between 120 and 130 dollars per barrel. Currently, the market has factored in a 7% probability of this worst-case scenario.

The Strait of Hormuz is a critical variable in this situation. It is one of the world's busiest oil transportation channels, connecting the Persian Gulf with the Indian Ocean. This narrow waterway, only 21 miles wide, handles 30% of global seaborne oil trade and 20% of liquefied natural gas supply, involving energy exports from Iran, Iraq, Kuwait, Bahrain, Qatar, Saudi Arabia, and the United Arab Emirates. Historically, despite Iran's repeated threats to block the strait, it has never been fully closed. JPMorgan's analysis indicates that Iran has refrained from blocking the Strait of Hormuz due to the high costs involved, which would violate international norms and directly threaten the economic interests of Gulf countries, potentially isolating Iran from the Gulf Cooperation Council (GCC). However, if the conflict escalates into a full-blown war, this "red line" could be crossed.

JPMorgan's basic prediction for oil prices remains cautious, expecting prices to stay in the mid to low 60 dollars per barrel range for the remainder of 2025 and 2026. However, the report also notes that if Israel attacks Iran's nuclear facilities, this baseline scenario could be invalidated. In the worst-case scenario, Iran's oil exports could decrease by 2.1 million barrels per day, affecting one-third of global oil production in the Middle East, and causing oil prices to surge to 130 dollars per barrel. In the short term, oil price volatility is expected to increase significantly, with any "spark" in the Middle East potentially igniting the market. In the long term, if geopolitical tensions do not escalate into full-scale war, oil prices may return to a more rational range.