Nine weeks into the Iran war, the global economy continues to lose record volumes of oil supply — yet prices have remained relatively contained and well below all-time highs. Those prices could soon change as "something is off" in the math, according to JPMorgan oil strategists.
In commodities markets, the arithmetic required to balance the market is straightforward. Supply plus inventory withdrawals equals consumption plus inventory builds.
In simple terms: How much oil is available in storage, and how much of that capacity is getting used up?
"Commodities markets are always forced into equilibrium: the market must clear," the JPMorgan strategists, led by head of global commodities strategy Natasha Kaneva, wrote. "If production falls short of demand, the gap can't persist."
As of late April, the disruption to global supply has reached 13.7 million barrels per day (mbpd), according to JPMorgan, or nearly 15% of the world's demand of roughly 100 mbpd.
There are only a few levers to pull in a disrupted market. The first answer is often spare production capacity, with producers ramping up to backfill losses. Yet the lion's share of global spare capacity is located in the Persian Gulf region, where the closure of the Strait of Hormuz has sent exports to near-zero. In the US, an addition of 1 mbpd of extra capacity can take six to 12 months to come to market, JPMorgan noted.
The second primary lever is inventories. The inventory lever was "activated almost immediately." Inventory draws reached an "extraordinary" 7.1 mbpd in April as nations tapped into their strategic reserves to prevent massive spikes in price, JPMorgan’s strategists wrote.
In March 2026, the International Energy Agency coordinated a record 400 million barrels of oil stock release from its 32 members. Global oil stocks are now likely to fall to all-time lows even if the Strait of Hormuz were to reopen by the end of April, according to research from Goldman Sachs.
Yet, even with spare capacity constrained and inventories nearing record lows, prices aren't at all-time highs.
Futures prices are up roughly 40% since the start of the war on international benchmark Brent crude (BZ=F) and US benchmark West Texas Intermediate (WTI) crude (CL=F). Even at their intraday highs during the war — $118.35 per barrel on Brent, and $112.95 on WTI — the contracts are still off their 2008 records by roughly $20 per barrel.
Lower perceived risk premiums under the US-Iran ceasefire, heavy inventory draws under the assumption that the Strait of Hormuz will soon reopen, and historically strong demand reduction have all helped to keep a lid on futures prices.
Prices may also appear contained because futures contracts don't reflect the all-in price of buying oil in a scarce market. In recent weeks, physical prices for near-term delivery in Asian markets have traded far above headline futures benchmarks, reaching as high as $210 per barrel in Singapore and a stunning $286 per barrel in Sri Lanka.
The broader market could change quickly if the situation in the Middle East doesn't move forward, according to strategists at several major Wall Street banks.
Over the weekend, Goldman Sachs' oil strategists raised their price targets for the fourth quarter to $90 and $83 per barrel on Brent and WTI, respectively, up from $80 and $75 per barrel, assuming Persian Gulf oil production can begin to normalize by the end of June.
"The economic risks are larger than our crude base case alone suggests because of the net upside risks to oil prices, unusually high refined product prices, products shortages risks, and the unprecedented scale of the shock," Goldman Sachs strategists wrote.
Citi has forecast prices potentially climbing even higher, noting that if oil flows remain disrupted through June, Brent could reach $150 per barrel and average $100 in the fourth quarter.
Demand, the final release valve for soaring prices, has begun to buckle. Observable global oil demand is expected to fall by an average of 4.3 mbpd in April, according to JPMorgan, nearly double the peak demand destruction seen during the 2008 global financial crisis when oil prices notched all-time highs.
However, the JPMorgan strategists noted, "What is striking is that these [demand] losses have occurred at prices that do not appear extreme by historical standards.”
The Iranian regime is incentivized to press for leverage, per Citi, maneuvering to keep the Strait of Hormuz closed and to continue tightening global oil supplies. With negotiations between Washington and Tehran stalled, the global market has no clear off-ramp.
For now, the Citi analysts said, traders may be assuming that “the conflict is too big not to be resolved quickly,” keeping prices lower than where reality dictates they should be.
Jake Conley · Breaking Business News Reporter
Mon, April 27, 2026
