The Middle East has erupted into conflict—so is oil really worth investing in right now?

Indicator 1: Supply-Demand Balance Sheet—Two Completely Different Pictures Before vs. After the Conflict Pre-conflict fundamentals: Oversupply—and a massive one at that. In its February report, the IEA stated plainly: In 2026, global oil supply will exceed demand by approximately 3.7 million barrels per day (Source: IEA, 'Oil Market Report,' February 12, 2026). What does this surplus mean in practical terms? Roughly enough to meet the entire annual oil consumption of a medium-sized country. Global inventories had already accumulated an additional 477 million barrels in 2025—approaching levels seen during the pandemic in 2020. On the demand side, the IEA forecasts global oil demand growth of 850,000 bpd in 2026, while OPEC itself projects 1.38 million bpd—a 50% gap between the two estimates. Even using OPEC’s more optimistic figure, supply growth still vastly outpaces demand. Non-OPEC producers—including deepwater projects in Brazil and Guyana—are expected to add 1.2 million bpd, and OPEC+ has just decided to increase output by 206,000 bpd starting in April. In short, the crude market before the conflict was unequivocally a buyer’s market; oil prices holding steady above $60/bbl were already quite respectable. Post-conflict: A Short-Term Supply-Demand Upheaval A closure of the Strait of Hormuz would immediately halt the transport of roughly 20 million barrels per day. Are there alternatives? Only Saudi Arabia and the UAE possess bypass pipelines, with combined spare capacity of just 3.5–5.5 million bpd (Source: IEA)—far insufficient to fill the gap. Routing around the Cape of Good Hope adds 20–30 days to transit time, and freight and war-risk insurance costs surge by over 50% (Source: Sina News, March 7, 2026). Reuters’ March 6 report put it bluntly: “Forecasts of oil supply surplus for this year are rapidly unraveling.” But here lies a critical question: How long can this reversal in supply-demand dynamics last? JPMorgan estimates current supply disruptions at ~1.5 million bpd, potentially widening to 3–6 million bpd under extreme scenarios. Barclays believes that if the conflict drags on for several weeks, Brent crude could test $120/bbl. Yet some institutions—including certain Wall Street analysts—argue that large-scale U.S. military action against Iran “may not be sustainable,” and the conflict could end within roughly four weeks. Overall, the pre-conflict surplus of 3.7 million bpd reflects structural fundamentals; the post-conflict supply disruption is event-driven. One is a slow-moving variable; the other, a fast-moving one. If you’re investing in oil based on fundamentals—those remain weak for now. If you’re betting on the conflict’s continuation—you’ll need to forecast the war’s trajectory. As for that… well, I certainly wouldn’t place a bet. Indicator 2: Inventory Data—Accumulating Pre-Conflict, Now Watch Post-Conflict As of the week ending February 27, U.S. crude inventories rose by 3.48 million barrels (vs. an expected 2.3 million), reaching 439.3 million barrels—the highest since May 2025; Cushing inventories also climbed by 1.564 million barrels (Source: EIA, released March 4, 2026). API data was even more dramatic: inventories surged by 5.647 million barrels—2.5 times the consensus expectation. This confirms that inventories were steadily building up pre-conflict—meaning the market simply wasn’t short on oil. Yet once the conflict erupted, sustained disruption to Strait of Hormuz shipping would likely cause EIA inventory data over the coming weeks to show declines.

JPMorgan Chase: The key issue in today’s oil market isn’t Iran—it’s Russia.

The focal point of the global crude market is undergoing a fundamental shift. JPMorgan Chase argues that while supply disruptions at the Strait of Hormuz have understandably rattled markets, the variable truly shaping the future of global energy is no longer crude supply—but refining capacity. And at the heart of this refining story lies Russia. Natasha Kaneva, JPMorgan’s Head of Commodities Research, notes that the latest round of U.S.-Iran tensions has further reduced crude transits through the Strait of Hormuz. Yet after months of supply volatility, markets have grown accustomed to treating crude supply as a dynamic variable—barrels may vanish, but they can also return relatively quickly. Refining, however, is far less flexible. Currently, global refinery throughput has plunged by 8.2 million barrels per day from年初 levels—with Russia alone accounting for roughly 20% of that decline, making it one of the largest drags on global refining activity. This situation is already having direct market impacts: Russian diesel and fuel oil exports have plummeted by about two-thirds from their peaks, further tightening an already constrained global distillate market and keeping refining crack spreads at abnormally high levels. JPMorgan judges that even if the Strait of Hormuz stabilizes, tightness in the refined products market could persist into 2027. Three Key Uncertainties Facing Global Refining—Russia Is the Most Overlooked Kaneva identifies two primary sources of uncertainty currently constraining the global refining system. First is the Middle East. JPMorgan has tracked over 30 attacks targeting regional refineries and petroleum processing facilities—but the actual physical damage remains difficult to assess. This region hosts 11.7 million bpd of refining capacity; how much of it can be swiftly restored remains highly uncertain. JPMorgan’s base-case scenario assumes only 250,000 bpd of capacity remains offline by year-end—but the bank openly admits low confidence in that estimate. Second—and most underestimated by markets—is Russia. Over the past three months, Russia’s refining system has endured relentless drone strikes launched by Ukraine. Damage extends beyond refineries and storage facilities to include secondary conversion units—such as hydrocrackers, fluid catalytic crackers, and reformers—that determine product yields. By June, Russian refinery throughput had fallen to 3.8 million bpd—down 1.5 million bpd from the start of the year. Russia’s domestic fuel crisis has evolved beyond consumer-level shortages into a broader operational emergency. Shortages have spread even to regions with local refineries—because supplies are being prioritized for Moscow. Ukraine’s strategic targeting logic is clear: attacks on refineries supplying fuel to the capital rose to 39% of all refinery strikes in 2026, up from 22% in 2025. Coinciding with Russia’s peak 'dacha season'—when millions drive to countryside vacation homes—seasonal gasoline demand has surged to its annual high, dramatically increasing the visibility of fuel shortages. In some areas, motorists have waited in gas station lines for days; stations have imposed rationing, and even major retail chains temporarily ran out of fuel. Retail fuel prices have spiked sharply—some independent stations reportedly charging over 50% above normal rates. Shortages are now spreading beyond private vehicles to agriculture, public transportation, utilities, logistics, and small-to-medium enterprises. With southern Russia’s harvest season kicking off in August, diesel demand will hit its annual peak—further intensifying supply pressures.

JP Morgan Says No Clear Oil Market Endgame Amid Iran Conflict

Sep 17, 2026

JP Morgan analysts express uncertainty over oil market trajectories amid the Iran conflict, noting prices exceed $100 per barrel despite demand destruction offsetting supply disruptions.

reuters

2026-09-17

JP Morgan Says No Clear Oil Market Endgame Amid Iran Conflict

JP Morgan Says No Clear Oil Market Endgame Amid Iran Conflict

FAQ