Brent oil aiming for $120? JPMorgan: Price trend depends on these four major variables

Brent oil aiming for $120? JPMorgan: Price trend depends on these four major variables

Shipping traffic through the Strait of Hormuz has nearly come to a halt, breaking the market's pricing assumption that “extreme disruption remains a low probability,” and the crude oil market is facing rapid repricing of geopolitical risk premium. The price trajectory will mainly depend on the duration of the conflict and the actual disruption scale, rather than long-term supply-demand fundamentals.

According to Windchase Trading Desk, on March 1, JPMorgan released a flash oil report titled "Pricing the Risk That Has Not Yet Occurred." The report pointed out that oil tanker traffic in the Strait of Hormuz has slowed to a near standstill, forcing the market to re-evaluate geopolitical risks and the resilience of global energy trade.

However, the report also emphasized that the Strait of Hormuz has not been officially closed, and the waterway has not suffered direct attacks. If the conflict quickly de-escalates, the oil price shock may be short-lived; if it continues to escalate and lasts for several weeks, Brent crude may rise to the $100–120 range.

JPMorgan believes oil price direction will depend on four major variables: the number of barrels affected, the duration of the conflict, whether alternative supply can quickly fill the gap, and geopolitical developments.

As of press time, Brent crude quoted at $79.4.

Black Swan Lands: Strait of Hormuz Nearly Completely Paralyzed

On March 1, 2026, U.S.-Israel joint military operations officially began. Trump publicly proclaimed that the goal is not only to destroy Iran's military capabilities, but also explicitly to create conditions for toppling the Iranian regime.

The event triggered an actual blockade of the world’s most important energy transport chokepoint—the Strait of Hormuz. According to JPMorgan data, oil exports through the Strait on February 28 dropped sharply from the normal ~16 million barrels/day to about 4 million barrels/day, almost entirely Iranian crude.

Variable One: Actual Impacted Barrels—15.8 Million Barrels/Day Capacity Suspended

Although the Strait of Hormuz has not been officially closed, the shipping market has effectively realized a blockade by “voting with its feet.”

The following major global shipping giants have announced suspension of passage:

  • Maersk: All ships crossing the Strait of Hormuz suspended from March 1;
  • Hapag Lloyd: Passage suspended and war risk surcharges added for Gulf cargoes, effective March 2;
  • CMA CGM: Ships in or heading to the Gulf ordered to retreat to safe anchorage;
  • MSC: All Middle Eastern cargo bookings suspended;
  • NYK Line, Mitsui O.S.K. Lines, Kawasaki Kisen Kaisha: All passage through Hormuz suspended.

The insurance market sends equally clear signals: War risk insurers and Lloyd’s underwriters issued notice on policy cancellation and repricing, war risk premium rates may rise up to 50%.

Insufficient alternative capacity: Under normal circumstances, the Strait of Hormuz carries about 19 million barrels/day of liquid exports, of which crude oil accounts for about 16 million barrels/day.

Saudi Arabia (Petroline pipeline, 5 million barrels/day capacity) and the UAE (Abu Dhabi pipeline, 1.5 million barrels/day capacity) together can only reroute about 3.3 million barrels/day—leaving about 15.8 million barrels/day of crude exports without alternative evacuation routes.

Known losses to oil and gas infrastructure are currently limited:

Iranian missile strikes on Riyadh and Saudi Eastern Province were intercepted without hitting any oil/gas facilities; a sanctioned empty tanker (80 barrels/day) was hit near Oman; a tanker carrying 500 barrels/day of gasoline was attacked; a berth at Dubai Jebel Ali port sustained shrapnel damage and was temporarily shut down. So far, core oil and gas infrastructure has not suffered direct strikes.

Variable Two: Conflict Duration—25 Days Is the Key Threshold

JPMorgan estimates the seven Gulf oil-producing nations dependent on Hormuz exports (Saudi Arabia, UAE, Iraq, Kuwait, Iran, Qatar, Oman) have about 343 million barrels of available onshore crude storage. At current production rates, this equates to approximately 22 days’ worth of output buffer.

Additionally, around 60 empty tankers currently docked inside the Gulf can absorb another 50 million barrels of crude, extending the buffer by 3–4 days.

In conclusion, Gulf oil producers in a full Hormuz shutdown scenario can sustain normal production for up to about 25 days. Beyond this point, exhausted storage capacities will force mandatory output cuts.

As for conflict duration, President Trump said in Axios interview the plan was at least five days of bombing, but noted “several exit options,” and estimated strikes on Iran could last about a month in another interview. This uncertainty makes the 25-day threshold the most important risk observation node at present.

Variable Three: Alternative Supply and Strategic Reserves—The Only "Fire Extinguisher"

The market entered the crisis in a clear oversupply state. In the first two months of 2026, the global crude market had an oversupply of around 1.4 million barrels/day, providing an initial buffer for short-term shocks.

However, if the conflict exceeds 25 days, forced output cuts could remove up to 16 million barrels/day of crude and refined product exports from the market. Nearly all effective spare capacity is located within the Persian Gulf itself, forming a “the only rescue force is inside the fire” dilemma:

  • US shale oil: can respond, but drilling, completion, and infrastructure limit response time—a supply increase needs several months;
  • Russia: theoretically can increase by 0.3–0.4 million barrels/day, but relatively speaking it’s a drop in the bucket and also requires time;
  • Other non-OPEC oil producers: lack spare capacity and rapid cycle response ability.

Strategic reserves are the only immediately available buffer mechanism. OECD members’ strategic oil reserves currently total about 1.247 billion barrels, including 935 million barrels of crude and 312 million barrels of refined products. This is the last line of defense to prevent runaway global oil prices in extreme scenarios.

Variable Four: Subsequent Developments—Can the "Venezuelan Model" Be Replicated?

On the political front, JPMorgan maintains previous assessment: The ultimate goal of US-Israel joint action is not “regime change” but “change of regime behavior.” Namely, imposing a “targeted reshaping” on Iran as was done to Venezuela, forcing the Iranian regime into negotiations without provoking total state collapse.

President Trump stated that IRGC members are seeking amnesty and Iran is ready to negotiate, implying a window for diplomatic resolution. If the conflict de-escalates before sundown on Monday (start of the Jewish holiday Purim), the oil price spike may prove temporary.

The main tail risk is if the Iranian regime loses command and control over the Islamic Revolutionary Guard Corps (IRGC)—which there was a sign of during the recent Oman attack incident—bringing more unpredictable instability. Hezbollah's reprisal actions may further exacerbate this risk.

Meanwhile, Russia and China have so far made only formal statements of concern, without substantial economic or military commitments, for now not constituting additional variables for escalation.

JPMorgan cites historical data from eight medium/large oil-producing country regime changes since 1979, offering valuable quantitative patterns: From conflict outbreak to price peak, average oil price surge was 76%; in the first month after conflict, prices rose about 5% on average; within 3 months, the average increase expanded to 30%, with prices often stabilizing at about 30% above pre-conflict levels.

The 1979 Iranian Revolution is the most direct historical reference:

Iran’s crude production plunged from 5.3 million barrels/day in 1978 to 3.17 million barrels/day in 1979, then to 1.4 million barrels/day in 1981. In January 1979, Iranian crude exports plummeted by 4.8 million barrels/day, about 7% of global supply at that time. Panic buying and speculative hoarding drove prices from $13/barrel in mid-1979 to $34/barrel in mid-1980, triggering a global recession. Prices did not return to pre-crisis levels until the mid-1980s.

Today, Iran’s crude output is about 3.3 million barrels/day, still well below pre-revolution levels.

JPMorgan Maintains Existing Forecast for Now, but Extreme Scenario Window Has Opened

Summing up the four variables above, JPMorgan states clearly: At this stage, it will not adjust its existing oil price forecast. Its 2026 Brent crude average price forecast remains $58/barrel (1Q26: $60, 2Q26: $59, 3Q26: $56, 4Q26: $55).

However, JPMorgan simultaneously gives clear scenario boundaries: If the conflict lasts longer than three weeks, Gulf oil producers will exhaust storage and be forced to cut production, Brent may trade in the $100–120 range.

For investors, the core message is: The crude oil market has switched from "pricing known fundamentals" to "pricing unknown risks."

25 days is the watershed dividing short-term price surges from structural supply crises. Until the conflict situation is clarified, volatility in the energy sector will persist, and movements in strategic reserve and signals of diplomatic engagement will be key leading indicators for judging the price top.

 

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The above content is from Windchase Trading Desk.

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