Wall Street’s “soul-searching question”: How high can oil prices really go?

Since the outbreak of the Iran war, international oil prices have surged from $60/barrel at the beginning of 2026 to above $100, but Wall Street institutions warn that this may be far from the end. The ultimate direction of oil prices depends on a key variable: how long the blockade of the Strait of Hormuz will actually last.

The Bernstein energy team has built three scenario models based on the duration of the blockade: If the blockade lasts one month, Brent peaks at about $100/barrel; if it extends to three months, the peak rises to $140; if it lasts six months, the peak may reach $170/barrel. Bernstein considers a one-month blockade as the base scenario but clearly points out that in the three to six months scenario, global economic recession will be "inevitable".

Meanwhile, JPMorgan gives another warning. According to a previous article by Wallstreetcn, JPMorgan’s commodity chief Natasha Kaneva’s team stated in a March 17 report that the stability of Brent and WTI around $100 is an “illusion”—Middle Eastern Dubai and Oman crude spot prices have surged to $155/barrel, creating a price gap of over $55 with Brent. The factors supporting Brent's relative stability—regional stock buffer, benchmark pricing deviations, and policy interventions—are essentially short-term; once Atlantic basin inventories are depleted, Brent will be forced to catch up upwards.

The market still overall prefers a “brief conflict” scenario. Bernstein points out that oil stock pricing implies a 2026 oil price of about $80–$100, with a long-term price of about $70, and that recession risk has not yet been priced in. “Time will tell if this is correct,” Bernstein writes.

Complete Blockade of Hormuz: Daily Supply Gap Up to 15.3 Million Barrels

The total closure of the Strait of Hormuz would have a huge potential impact on global supply. According to tanker tracking data, OPEC crude oil and condensate loadings have already dropped by 13.8 million barrels/day, plus disruptions in Middle Eastern LPG production totaling about 1.5 million barrels/day, making the daily supply gap under a full blockade as high as 15.3 million barrels. In March, only partial loadings were affected, so the actual impact was about 10 million barrels/day.

Faced with such a scale of supply disruption, existing buffer mechanisms can hardly fully make up for it. Bernstein estimates that of about 250 million barrels of floating reserves outside the Persian Gulf, only around 150 million barrels can be quickly mobilized; the Strategic Petroleum Reserve (SPR) can release about 400 million barrels within 180 days, together buffering about 550 million barrels. But the firm believes this scale is still insufficient to compensate for cumulative supply gaps from a prolonged blockade.

Additionally, although expanding oil delivery via the UAE’s East–West pipeline to the Red Sea or diverting through Fujairah port is somewhat feasible, Bernstein also points out that these alternate routes face risks of Iranian attacks and their relief effects remain highly uncertain.

Three Scenarios: Peak Oil Prices Could Reach $170

Bernstein bases its three price paths on the duration of the blockade, which produce significantly different scenarios.

Base scenario (blockade for one month): If the strait resumes traffic by the end of March, Brent's monthly peak is about $100/barrel, the average price for 2026 is about $80/barrel, with average demand shrinking about 300,000 barrels/day.Moderate scenario (blockade for three months): Brent's monthly peak rises to $140/barrel, average price is about $100/barrel, demand in 2026 shrinks about 1 million barrels/day. Bernstein explicitly states that global recession will be "inevitable" in this scenario.Extreme scenario (blockade for six months): Brent's monthly peak hits $170/barrel, average price about $120/barrel, demand in 2026 shrinks about 2.3 million barrels/day—approaching the 2.4 million barrels/day demand destruction during the 2008 global financial crisis.

Even so, Bernstein believes that given the severe consequences of a prolonged blockade for the global economy, "rationality will prevail, and a solution is likely to emerge in the coming days to weeks". But the firm admits that current market pricing has not fully factored in tail risks of a three- to six-month blockade and recession.

The Buffer Will Eventually Run Out; Market Has Not Priced in Recession

JPMorgan’s Natasha Kaneva team warns that the three factors behind Brent’s current stability—regional stock excess, benchmark pricing deviances, and policy interventions—are essentially short-term buffers, unable to conceal the true level of global supply tightness in the long run. Once Atlantic basin commercial inventories deplete faster, the global market will be forced to reset and clear under tighter supply, and Brent will be forced to reprice upwards, approaching Middle Eastern spot price levels. The current $55+ price gap between Brent and Dubai will become the biggest upside risk premium hanging over global oil prices.

Bernstein also points out that current implied oil price range in oil stock pricing is $80–$100, long-term price about $70, in line with one to three months blockade scenarios, and does not incorporate long-term risk premium. "The market likewise has not priced in a recession," Bernstein writes.

For market participants, the core variable is only one: when will the Strait of Hormuz reopen? This answer will ultimately determine the direction and ceiling of global oil prices in 2026.

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