JPMorgan warns global oil supply disruptions of 13.7 million bpd in April could push Brent to $150 and lift US inflation to 4%, with the Fed on hold well into 2027.
Summary:
- Global oil supply disruptions reached 13.7 million barrels per day in April, equal to roughly 14% of total world demand, with inventories drawing down at 7.1 million bpd to partially cover the gap
- The market remained short by an estimated two million bpd even after that drawdown, with spare capacity from Saudi Arabia and the UAE effectively unavailable due to Strait of Hormuz closures
- Global oil demand fell by 4.3 million bpd in April, nearly double peak demand destruction recorded during the 2008 financial crisis
- JPMorgan puts near-term Brent in a $120 to $130 range, with $150-plus possible if disruption extends into mid-May; Citi has warned of $150 Brent if Hormuz flows remain blocked into June
- JPMorgan's base case has US headline CPI reaching 4% by May, with all three of its scenarios keeping the Fed on hold well into 2027
- JPMorgan expects Brent to average $96 per barrel in 2026, with the market shifting into meaningful oversupply from September as Gulf producers maximise output after the strait reopens
JPMorgan has issued a stark assessment of the global oil market, warning that supply disruptions from the US-Iran conflict are driving demand destruction on a scale not seen since the 2008 financial crisis, and that the inflationary consequences will keep the Federal Reserve sidelined well into 2027.
Global supply disruptions reached 13.7 million barrels per day in April, roughly 14% of world demand, according to JPMorgan global commodities strategy head Natasha Kaneva. With spare capacity from Saudi Arabia and the UAE rendered inaccessible by the closure of the Strait of Hormuz, the world has relied heavily on inventory draws to bridge the gap, pulling down stockpiles at a rate of 7.1 million bpd last month. Even so, the market remained short by an estimated two million barrels per day.
The result has been demand destruction of historic proportions. Global oil demand fell by 4.3 million bpd in April, almost double the peak loss recorded during the financial crisis, and at price levels that do not look extreme by historical standards. Around 87% of that demand pain is concentrated in the Middle East, Asian frontier economies and Africa, but JPMorgan is explicit that Western consumers face further adjustment ahead. US regular gasoline averaged $4.05 per gallon in late April, up from around $2.88 before the war began, and elevated fuel costs are already beginning to weigh on driving and air travel demand.
On prices, JPMorgan puts near-term Brent in a $120 to $130 range, with $150 or above possible if the disruption extends into mid-May. Citi has issued a comparable warning, flagging $150 Brent if Hormuz flows remain blocked into June. Even in JPMorgan's base case, which assumes a June reopening of the strait, the bank expects Brent to average $96 per barrel across 2026, with quarterly averages of $103 in the second quarter and $104 in the third, as inventory stress, tanker shortages and refinery ramp-up constraints keep the market tight long after the chokepoint clears.
On inflation, JPMorgan's base case has US headline CPI hitting 4% by May before gradually retreating toward 3% by December and below 2% by April 2027. In its worst-case scenario, a re-escalation that sustains crude above $120 through the summer could push CPI above 5%. Across all three scenarios the bank has modelled, inflation remains above the Fed's 2% target through early next year, leaving rate cuts firmly off the table for now.
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JPMorgan's framing of the current disruption as structurally worse than it appears in headline prices is a significant signal for traders. The bank's $120 to $130 near-term Brent range, with $150-plus possible, sits well above levels that would ordinarily trigger coordinated policy responses, and the acknowledgement that markets are still short by two million barrels per day even after historic inventory draws suggests the physical tightness has not been fully priced in. The forecast of Brent averaging $96 for the full year 2026, with third-quarter peaks around $104, gives commodity desks a relatively firm ceiling to trade against, while the projected shift to oversupply from September as Gulf producers maximise output post-reopening introduces a sharp directional pivot to watch for in forward curves.
