JPMorgan Warns Oil Could Hit $120 as Iran War Threatens Global Supply

Wall Street's Most Alarming Oil Forecast

JPMorgan's head of global commodities research, Natasha Kaneva, has issued a stark warning that "unprecedented disruption" to global oil markets is no longer improbable . The bank now forecasts Brent crude could surge to $120 per barrel if the Iran conflict persists, forcing Gulf producers to exhaust storage capacity and shut down production .

A war lasting more than three weeks would exhaust Gulf countries' storage capacity as barrels build up with nowhere to go, forcing them to shut down production . While many analysts have raised their oil forecasts recently, none have gone as high as JPMorgan's $120 prediction, with other Wall Street firms seeing prices potentially rising to $100 a barrel .

West Texas Intermediate futures briefly topped $110 per barrel Monday, reaching levels not seen since Russia invaded Ukraine in 2022 . Crude oil prices settled up more than 6% Monday after surging over 12% earlier in the day, while European natural gas futures soared more than 40% .

The Strait of Hormuz Crisis

Tanker traffic through the Strait of Hormuz, the world's most important chokepoint for oil shipments, has come to a standstill as ship owners take precautionary measures, with about a third of the world's total seaborne oil exports passing through the Strait in 2025 . The war has already led to the first near total halt to shipping through the Strait in modern history .

The market is currently grappling with physical supply being choked off by drone strikes, while Middle Eastern producers are simultaneously hitting a critical point where they must shut in production simply because there is nowhere left to put the oil . The UAE is likely the next producer at risk of shutting in output, potentially within the next five to seven days .

Neil Atkinson, former head of oil at the International Energy Agency, warned that with no precedent for this situation, "the sky is the limit" for oil prices . Brent crude futures could climb to $135 per barrel if the current situation persists for four months, with forward-looking analysis showing prices staying above $110 per barrel for two months under current conditions .

Market Implications and Economic Fallout

JPMorgan's trading desk has shifted to "tactically bearish" on American equities, warning that US stock traders are unprepared for a correction that could see the S&P 500 falling as much as 10% from its peak . Oil breaching the $100 per barrel mark creates significant economic stress, with elevated energy expenses rippling through numerous industries and potentially constraining corporate profitability .

Drivers in the US will likely see gasoline prices start to rise today or tomorrow , while America's energy profile has changed dramatically over decades with net petroleum imports down since 2005, though gasoline prices can still become a political trigger even if macro damage is limited .

Europe and Asia are most in trouble structurally, with parts of Asia facing sharper pressure through higher fuel costs, supply-chain disruption, and growth concerns . Qatar has shut down liquefied natural gas production after drone strikes hit key facilities, affecting about 20% of global LNG exports that come from the Gulf .

Diverging Views on Market Outlook

Morgan Stanley's chief investment officer Mike Wilson maintains a constructive view on equities for the next six to twelve months, characterizing the market as experiencing a "rolling correction" since last October . Wilson believes "we're closer to the end of this rolling correction than the beginning and remain constructive over the next 6-12 months" .

Bank of America's Francisco Blanch suggests that if hostilities end quickly, oil prices could drop back to the $60 to $70 per barrel range, noting tensions may only be mildly disruptive if hostilities end within days . However, the US and Iran appear dug in, with Iran's security chief rejecting negotiations and saying the joint US-Israeli attack had dragged the entire region into an unnecessary war .

The stark divergence in forecasts reflects unprecedented uncertainty in energy markets. While some see potential for rapid de-escalation, JPMorgan's warning suggests investors should prepare for sustained volatility that could reshape global economic dynamics for months ahead.