April 2 - J.P. Morgan warned that oil prices face a material upside if supply through the Strait of Hormuz remains constrained into mid-May, estimating a near-term trading range of $120-$130 per barrel and a tail risk of prices climbing above $150 per barrel should the disruption persist.
In a note circulated on Thursday, the bank set out a base-case outlook in which the current interruption to shipments is resolved through negotiations after a period of supply stress and inventory drawdowns. Under that scenario, J.P. Morgan expects oil to stay elevated - above $100 a barrel - through the second quarter.
The note projects that prices would then pull back in the second half of 2026. That retracement is attributed to a partial reopening of the Strait of Hormuz combined with some replenishment or normalization of oil inventories.
J.P. Morgan highlighted that the magnitude and persistence of any price spike would be a central determinant of the wider economic fallout. The bank warned that a large and sustained jump in oil costs raises the risk of depressed demand and a possible recession if high prices remain in place for an extended period.
Markets reacted with heightened volatility on Thursday, with oil futures jumping after U.S. President Donald Trump said the U.S. would continue attacks on Iran.
Context and implications
The bank's outlook presents two distinct outcomes: a negotiated resolution that gradually eases market tightness, and a more severe scenario in which continued disruption maintains acute supply pressure and pushes prices substantially higher. The note links the timing of any reopening and the pace of inventory normalization directly to whether elevated prices persist into later parts of the year.
While the base case assumes a period of strain before normalization, the firm explicitly cautioned that the size and duration of price moves will shape broader macroeconomic effects, underscoring the connection between energy market dynamics and overall economic demand.
Note: The analysis above summarizes the key points and projections provided in the bank's note and the market reaction referenced in reporting on Thursday.