In an oil flash note sent to Rigzone late Tuesday by Natasha Kaneva, J.P. Morgan’s head of global commodities strategy, analysts at the company, including Kaneva, flagged an oil price “misalignment”.
The J.P. Morgan analysts outlined in this note that, “despite the scale of the disruption”, which they described as “arguably one of the largest exogenous supply shocks in recent history”, benchmark oil prices have “remained relatively contained, with Brent trading near $100 per barrel and WTI around $95”.
The analysts stated that, at face value, this could be interpreted as market complacency. They added that a closer examination, however, “suggests a misalignment between benchmark pricing and the geography of the disruption”.
“The key issue is that both Brent and WTI are Atlantic Basin benchmarks, while the current shock is concentrated in the Middle East,” the J.P. Morgan analysts said.
“As such, these benchmarks are disproportionally influenced by regional fundamentals that remain comparatively loose,” they added.
The analysts highlighted in the note that both the U.S. and Europe entered 2026 with comfortable commercial inventories, and said the broader Atlantic Basin remains relatively well supplied in the near term.
“In addition, the anticipation – and soon a partial realization – of SPR [Strategic Petroleum Reserve] releases has further dampened prompt tightness in both Brent- and WTI-linked markets,” the analysts highlighted.
“By contrast, Middle Eastern benchmarks such as Dubai and Oman provide a more accurate reflection of the physical dislocation,” they continued.
The analysts pointed out in the note that both Dubai and Oman cash prices were trading around $155 per barrel, “highlighting the severity of the shortage in barrels originating from the Gulf”.
“These benchmarks are directly exposed to export disruptions and therefore capture marginal scarcity more effectively than Atlantic-linked crudes,” they said.
The analysts went on to state that the geography of trade amplifies this dynamic.
“Most crude shipments through the Strait of Hormuz are bound for Asia, with China, India, Japan, and South Korea as the principal buyers,” they noted.
“As a result, the immediate physical shortfall is concentrated in Asian markets, where reliance on Gulf barrels is greatest. Early signs of demand destruction are emerging in Asia as product prices surge and spot barrels become prohibitively expensive,” they said.
The analysts stated that timing effects further reinforce this divergence.
“A typical voyage from the GCC to Asia takes approximately 10-15 days, while shipments to Europe require closer to 25-30 days via the Suez Canal, or even 35-45 days if rerouted around the Cape of Good Hope,” they highlighted.
“As a result, the impact of disrupted Gulf flows will hit Asian markets earlier and more acutely, whereas Atlantic basin benchmarks such as Brent and WTI will remain cushioned for longer by inventory overhangs and slower supply adjustments,” they added.
The J.P. Morgan analysts went on to warn that, “in this context, the apparent stability in Brent and WTI should not be taken as evidence of ample global supply”.
“It reflects a temporary buffer created by regional inventory overhangs, benchmark composition, and policy interventions,” they said.
“If the Strait does not reopen, this divergence is unlikely to persist – Brent and WTI will ultimately reprice higher as Atlantic basin inventories are drawn down and the global market is forced to clear at a materially tighter supply level,” they continued.
Hormuz
In a report sent to Rigone on Tuesday, analysts at Morningstar DBRS noted that, according to Lloyd’s list, “Iran has attacked 16 tankers and other vessels in the Persian Gulf and Gulf of Oman since the war began on February 28”.
“Most of these attacks were near the Strait of Hormuz (the Strait), through which roughly 20 percent each of global crude oil and seaborne gas flows,” the analysts added, noting that Iran has “vowed to keep the Strait effectively closed for the time being”.
The Morningstar DBRS analysts said Iran’s use of “hit and run tactics and its arsenal of drones, short-range rockets, and sea mines make it easy to attack ships, effectively closing the Strait”.
“Few ships are willing to risk traversing the narrow shipping lane until it is secure,” they said.
“However, currently, there are no actionable plans for the U.S. and allied forces to escort commercial shipping, and their ability to entirely secure the Strait anytime soon appears unlikely,” they added.
“Given the broad range of potential repercussions from the conflict, it remains unclear if the price increase will last over the medium term and if there will be a structural impact on oil and gas supply from the Persian Gulf,” the analysts went on to state.
“We note that the current 12-month (March 2027) futures price for West Texas Intermediate (WTI) crude oil is about $72 per barrel, which suggests the marketplace perceives little material change to fundamentals over a medium to longer period,” they highlighted.
The analysts revealed in the report that they were increasing their full year 2026 Brent crude oil price forecast from $63 per barrel to $68 per barrel and their full year 2026 WTI crude oil price forecast from $60 per barrel to $65 per barrel. They noted that there was no change to their previous full year 2027 and full year 2028 price forecasts.
Rigzone has contacted the White House and the Iranian Ministry of Foreign Affairs for comment on the Morningstar DBRS report. At the time of writing, neither have responded to Rigzone.
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