JPMorgan discusses the Middle East crisis: Iran "grows more united the more it fights," aims to win through a "war of attrition," Asia will be impacted first.

The Middle East conflict is evolving from a theoretical discussion of geopolitical risks into tangible economic costs. JPMorgan’s latest strategic research report warns that Iran is adopting a “war of attrition” rather than a “firepower showdown” as its core strategy, attempting to achieve survival as victory by exhausting the will of the U.S. and Israel. The impact of this conflict on global energy markets and the macroeconomy may be far more profound than the market’s current expectations.

According to Chase Trading Desk, in JPMorgan’s report released on April 6, the Islamic Revolutionary Guard Corps (IRGC) has seen its position in the conflict continuously strengthened, the likelihood of regime change is close to zero, Iran has clearly refused unilateral ceasefire, and has put forth specific economic conditions for a ceasefire.

Meanwhile, the blockade of the Strait of Hormuz has caused daily crude oil flow to plummet from the normal level of 15–20 million barrels to less than 2 million barrels, with the supply gap expected to reach 13 million barrels/day this month.

The shock is spreading westward along the supply chain. Asia is the first region to suffer physical shortages; Bangladesh, Sri Lanka, Pakistan, Indonesia, and the Philippines are experiencing refinery shutdowns, flight reductions, and emergency declarations. If OECD inventory releases remain confined within each country, Southeast Asia’s demand loss in May may exceed 2 million barrels/day, approaching 3 million barrels/day in June.

Iran’s Strategy: Survival as Victory, “War of Attrition” Preferred Over “Cold Peace”

Iran considers a long-term hot war more acceptable than a “cold peace” of lingering under sanctions. For the IRGC, survival itself equals victory.

The report notes that the IRGC is well aware it lacks the military strength to match the U.S.-Israel coalition, but believes it can drag its opponents down through horizontal escalation—spreading pain to regional and global economies, depleting enemy interceptor missile inventories, and sustained pressure via drones and the Strait of Hormuz. The U.S. and Israel may win every battle, but could still lose control over the conflict’s trajectory.

The report also points out that the Iranian regime judges Trump as lacking the political will for a war of attrition, and that Israel faces restrictions due to limited ammunition supplies. Trump’s April 1 national address was described as “continuation, not escalation,” and U.S.-Israel bombing operations have always stayed within the initially set 4–6 week window. However, U.S. military planners are running out of targets, and global energy market risks are rising.

If the U.S. decides to send ground troops into Iranian territory, it will greatly increase motivations for all sides to escalate—such as mining and blockading the strait, attacking regional infrastructure, or activating the Houthis to close the Bab el-Mandeb.

IRGC Ascendant, No Hope for Regime Change, Ceasefire Talks at Impasse

The report explicitly refutes expectations of regime change. The Supreme Leader is no longer at the top of the power system; instead, the IRGC has grown stronger due to the conflict. There is no organized alternative political force within Iran, and forcing regime change is more likely to lead to national failure than to a stable transition.

Military strikes have sparked intense Iranian nationalist sentiment, and the slogan of nighttime street protests is “No surrender, no compromise, fight the U.S. to the end.” The IRGC’s identity is rooted in defending revolutionary independence and refusing to be “conquered”—a stance deeply shaped during the Iran-Iraq war (1980–1988), and it continues to this day.

Regarding the ceasefire issue, no ceasefire negotiations are presently underway. Iran refuses to negotiate “under the barrel of a gun,” and any serious ceasefire effort must encompass deterrence, sanctions, sovereignty, and nuclear issues, and cannot be unilaterally led by the U.S. or Israel.

Iranian Foreign Minister Abbas Araghchi stated that there are still 1,000 pounds of 60% enriched uranium “missing under the rubble,” further driving Iran to the conclusion that nuclear weapons are its only reliable shield.

Hormuz: Strategic Chip, Not Just Retaliation Tool—Long Road to Reopening

The Strait of Hormuz is core to Iran’s deterrence strategy. Normally, the strait handles about 15–20 million barrels of crude oil daily, accounting for approx. 20% of global oil supply and 38% of global seaborne oil trade, and is also a key channel for LNG, LPG, and petrochemical products.

The report notes Iran’s attack on Qatar’s Ras Laffan LNG facility destroyed 17% of its capacity, signaling a shift from “symbolic retaliation” to “strategic sabotage” in Iran’s strike pattern.

At present, Iran allows selectively partial passage for friendly nations’ tankers, but this framework hasn’t restored meaningful throughput—in fact, it acknowledges Iran’s substantive control over a core artery of global energy.

Maintaining the strait’s blockade is much easier than fully restoring transit confidence—even if only 1–2 drones launch attacks daily, it’s sufficient to sustain the blockade. If the strait isn’t reopened before early May, OECD commercial inventories may drop to operational minima. Even if a ceasefire is reached, shipping companies, insurers, port operators, and crew all need time to rebuild confidence. The most optimistic estimate is two months to restore port operations, and four months for a more comprehensive recovery of oil production and flow. If the blockade lasts over six months, there’s a risk of structural damage to oil reservoirs and fields.

Energy Shock Comparable to COVID, Upward Oil Price Risk Underestimated

This energy shock can be compared to the COVID pandemic, as its nonlinear impact risk on economic activity far exceeds the energy crisis triggered by the Russia-Ukraine conflict in 2022. Unlike 2022, the blockade of the Strait of Hormuz could cause a physical shortage of energy supply—over 50% of Asia’s crude oil and more than a third of its natural gas are imported via the strait.

If energy prices stay near $100/barrel until mid-year (then fall back to $80/barrel), consumer prices may rise by about 0.8 percentage points, dragging global GDP down by about 0.6 percentage points. However, if flow is still blocked by mid-May, risks are rising that oil prices could be pushed to $120–$130/barrel, and prices over $150/barrel are not impossible.

This month’s total reduction in supply is expected to reach 13 million barrels/day. With the Strait of Hormuz effectively closed, the Red Sea route has become the key alternative for energy exports; if this route is also disrupted, logistical pressure will further mount.

Gulf States Suffer Double Blow, Asia in Crisis, U.S. Faces Oil Price Erosion of Tax Cuts

For Gulf Cooperation Council (GCC) countries, the conflict creates both physical and economic losses—about 50 processing plants are estimated to be damaged. The report forecasts Qatar’s GDP will shrink 9% in 2026, downgraded 14 percentage points from a month ago; Kuwait’s GDP forecast is down to -7.1%. The GCC region is expected to see sharp contraction in the first half of 2026, with port data showing trade in Qatar and Bahrain hit hardest.

In Asia, Bangladesh, Sri Lanka, Pakistan, Indonesia, and the Philippines are already seeing physical shortages, refinery shutdowns, flight reductions, and emergency declarations. Africa will begin to feel the shock in early April, and Europe is expected to be affected by mid-April—but Europe’s main issue will be rising costs and supply competition with Asia, not physical shortages.

The U.S. is at the end of the shock chain, and with its longer shipping times and large domestic output, is unlikely to face shortages in the short term. But the impact will transmit via prices, especially in California’s refined oil market. U.S. retail gasoline prices are already near $4/gallon; if the strait remains effectively closed past mid-April, gasoline prices are expected to exceed $5/gallon. If recent gasoline price hikes continue for the whole year, the hit to consumer purchasing power could reach about $100 billion, potentially offsetting—even exceeding—the expected $150–$160 billion in personal tax relief this year.

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The above highlights are from Chase Trading Desk.

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