JPMorgan says each extra month of Iran war adds $7-$8 to Brent crude

As oil markets reel from renewed hostilities between the United States and Iran and a fresh threat to Red Sea shipping, JPMorgan ↗ 0.47% has quantified the cost of a prolonged conflict: each additional month of disruption could add roughly $7 to $8 per barrel to Brent crude, potentially lifting the monthly average to around $114 if the standoff extends to three months.

In a note published Thursday, a team led by Natasha Kaneva, head of global commodities research, said that if the conflict stays contained to one month, Brent is likely to remain capped at around a $94 monthly average, as depressed demand and China's low crude imports have offset eroding inventory buffers. But those buffers are "finite," the analysts warned. "Each additional month of disruption requires progressively larger releases from a shrinking pool of available barrels," they wrote.morningstar

Oil Surges Past $100 on Dual Strait Threat

Brent crude surged more than 7% on Thursday after Yemen's Houthi militants claimed responsibility for attacks on two Saudi tankers in the Red Sea, while President Donald Trump threatened a "massive attack" on Iran. The rally brought prices to a two-month high, briefly touching $100 a barrel before easing on Friday.morningstar

JPMorgan noted that even at $100, Brent is only $13 above the bank's estimated fair value for July of $87 a barrel, suggesting markets are pricing in only "a modest geopolitical premium". The analysts had assumed the Strait of Hormuz would reopen by June 1, with tanker traffic returning to 73% of prewar levels by now. Instead, traffic stands at just 50%, and pipeline-rerouted flows of roughly 7 million barrels per day are increasingly vulnerable to disruption in the Red Sea.morningstar

The Houthis, Iran's allies in Yemen, declared a maritime embargo on Saudi Arabia on July 20, threatening to close the Bab el-Mandeb Strait — the southern gateway to the Red Sea — in retaliation for Saudi strikes on Yemen. The U.S. Navy's Joint Maritime Information Center warned this week that the group has completed preparations to attack shipping near the strait.npr+3

Wall Street Raises Alarm

Goldman Sachs The Goldman Sachs Group, Inc. ↗ 1.44% separately warned that Brent could exceed $120 per barrel by the fourth quarter if the Strait of Hormuz remains disrupted, though its base case still projects $80 per barrel for Q4, assuming tensions eventually ease. The bank maintained its 2027 forecast of $75 per barrel for Brent, contingent on the strait remaining open.oilprice+1

The conflict, which began with U.S. and Israeli strikes on Iran on February 27, has removed roughly 11.1 million barrels per day of supply from the market, according to JPMorgan. Demand destruction of 5.1 million barrels per day has absorbed about 46% of those losses. The analysts said U.S. gasoline prices, currently averaging $4.10 per gallon nationally, could climb above $4.50 if the conflict persists for two more months.morningstar

With both the Strait of Hormuz and the Bab el-Mandeb now under threat, the market faces simultaneous pressure on the two chokepoints through which much of the world's energy supply flows — a scenario few forecasters had priced in just weeks ago.