JPMorgan Chase has projected that Brent crude prices may climb to 120 dollars per barrel if a prolonged Middle East conflict leads to sustained disruption of oil flows through the Strait of Hormuz, one of the world’s most critical energy transit corridors.
The bank cautioned that in the event of a complete blockage, Gulf producers would only be able to maintain normal production levels for approximately 25 days. Beyond that window, storage facilities across the region would likely reach capacity, forcing a broader production shutdown.
Markets Rally After Major Escalation
Oil prices rose sharply on Monday following a significant escalation involving the United States, Israel and Iran. Brent crude for April delivery advanced 8.7 percent to 79.28 dollars per barrel at 9:00 a.m. ET, while West Texas Intermediate gained 7.8 percent to trade at 72.16 dollars.
The surge came after U.S. and Israeli forces carried out a coordinated military operation, codenamed “Operation Epic Fury,” targeting Iranian missile facilities, command centers and senior leadership.
Iran’s Supreme Leader, Ayatollah Ali Khamenei, was killed during the strikes, according to reports. Nearly 50 senior Iranian officials were also said to have died in the operation.
In response, Iran launched missile and drone attacks targeting Israel and U.S. military installations in the Persian Gulf, including locations in Bahrain and the United Arab Emirates. Strikes on Israel reportedly resulted in at least 11 fatalities, while three American service members were killed and five others wounded during the initial counteroffensive.
Strait of Hormuz Faces De Facto Closure
Although the Strait of Hormuz has not been formally declared closed, shipping activity has declined by approximately 70 percent amid escalating security risks. Safety concerns, rising insurance costs and operational suspensions by major shipping lines have effectively curtailed traffic through the waterway.
An estimated 200 tankers carrying crude oil and liquefied natural gas have either anchored nearby or diverted to alternative routes to avoid the strait. Major global shipping companies, including Hapag-Lloyd and CMA CGM, have temporarily halted transits through the corridor.
War risk insurance premiums have increased by as much as 50 percent, significantly raising the cost of passage and rendering voyages economically challenging for many operators.
Strategic Importance of the Corridor
The Strait of Hormuz remains one of the most vital maritime chokepoints in global energy trade. The route facilitates the daily movement of between 20 million and 21 million barrels of crude oil, condensate and petroleum products. This volume accounts for roughly 20 percent of global daily oil consumption and nearly 30 percent of total seaborne crude trade.
JPMorgan’s outlook underscores the potential for heightened volatility in global energy markets should disruption in the corridor persist, particularly given the concentration of export infrastructure in the Gulf region and the limited short-term alternatives for rerouting large volumes of crude.