JP Morgan maintains 2025 forecast for oil prices in low-to-mid $60s

JP Morgan maintained its base case forecast for oil prices in the low-to-mid $60s through 2025 and $60 in 2026, despite geopolitical tensions with Iran. While current prices already reflect a risk premium, JP Morgan analysts noted that a broader Middle East conflict, potentially closing the Strait of Hormuz, could cause oil prices to surge to $120-130/bbl. This assessment comes amid escalating tensions, including Iran's breach of non-proliferation obligations and threats of retaliation against U.S. bases.

Analysis

JP Morgan has maintained its base case forecast for oil prices to remain in the low-to-mid $60s per barrel through 2025, and at $60 per barrel in 2026, despite escalating geopolitical tensions in the Middle East. The investment bank acknowledges that current oil prices, with Brent crude near $68.76/bbl and WTI at $67.14/bbl, already incorporate a geopolitical risk premium, trading approximately $4 higher than their estimated June fair value of $66/bbl. However, significant upside risk persists; JP Morgan highlights a worst-case scenario where a broader conflict, potentially leading to the closure of the Strait of Hormuz and a supply disruption exceeding 2.1 million barrels per day from Iranian exports, could cause oil prices to surge to the $120-130/bbl range. This cautious outlook, reflected by a moderately negative sentiment score of -0.35 and a cautious tone, is underscored by recent events, including U.S. personnel movements, Iranian threats against U.S. bases, and the U.N. nuclear watchdog declaring Iran in breach of non-proliferation obligations, heightening concerns within energy markets.

Key Decisions for Investors

• Investors should closely monitor geopolitical developments in the Middle East, particularly concerning Iran and the Strait of Hormuz, as these are primary drivers for potential oil price volatility.
• Consider strategies to navigate the bimodal risk profile outlined by JP Morgan, balancing the relatively stable base-case price forecast in the low-to-mid $60s against the low-probability, high-impact scenario of prices surging to $120-130/bbl.
• Evaluate current oil market positions recognizing that prices already incorporate a risk premium of approximately $4/bbl above JP Morgan's estimated fair value, weighing this against the substantial upside potential should geopolitical tensions escalate into a broader conflict.