Prolonged Gulf outages could choke supplies and push oil prices to record highs.
JPMorgan strategists estimate that Brent could hit $120 a barrel if disruptions from the raging Middle East conflict continue for more than three weeks, depleting Gulf storage capacity and leading to production shutdowns that would strain global supplies.
In a note led by Natasha Kaneva, head of commodities research, JPMorgan’s team says prices will be affected by the extent and duration of supply losses, the pace of mobilizing replacement barrels or strategic reserves, and whether shipments through key routes such as the Strait of Hormuz remain constrained by security risks and rising insurance costs.
Although the strait is not officially closed, shipping has slowed due to rising insurance costs and increased security concerns.
JPMorgan estimates that Gulf producers including Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, Iran, Qatar and Oman tied to Hormuz have about 343 million barrels of onshore reserves, enough to last about 22 days of production if exports are halted.
If the disruption lasts more than three weeks, producers may be forced to limit production, tighten global supply and push Brent to $100-120.
The bank also notes that previous regime changes in medium and large oil producing countries led to an average price increase of 76% from peak to peak.
The global oil markets have become more tense in the Middle East after the US and Israeli military attacks against Iran.
Oil prices edged higher on Monday, with Brent crude trading as high as $77 a barrel, while stock futures fell.
Energy companies such as Exxon and Chevron have benefited as higher oil prices boost profits, along with defense contractors such as Lockheed Martin and Northrop Grumman.
