Saudi Arabia's main east-west oil pipeline remains shut after an attack by an Iraqi militia, pushing the kingdom to explore an $8 billion loan from commercial lenders. JPMorgan says it can no longer model a clear endgame for oil markets six months into the US-Israeli war on Iran, even as Brent trades near $106 a barrel. Trump will meet Gulf leaders in New York next week, while US officials have also opened direct contact with Yemen's Ansar Allah.
JP Morgan said on Thursday that it has no clear baseline view for oil markets for the first time since the US-Israeli war on Iran began. According to JPMorgan's analysts: "We simply don't know how to model the endgame." Six months in, many of the economic thresholds the bank once assumed Washington wouldn't cross have already been crossed.
JPMorgan sees no clear endgame
The bank noted oil prices have climbed above $100 a barrel, with gasoline at $4.37 a gallon and US diesel at an all-time high of $6.31 a gallon heading into winter. It pegs Brent's fair value at around $90 a barrel for September, against current prices near $106, meaning markets are pricing in further supply losses beyond the roughly 10 million barrels per day already disrupted.
Yet prices haven't risen as sharply as expected: global inventories have fallen by about 555 million barrels since the conflict began, only about a third of the decline JPMorgan had projected, because governments and consumers have leaned on demand destruction instead. Global oil demand has run about 4.4 million barrels per day below year-ago levels, offsetting much of the lost supply. Brent has averaged just $94 since the war began. Still, the bank cautioned that if Middle East disruptions persist, prices could move higher later this year as inventories keep declining. OPEC, meanwhile, still expects demand to grow by 380,000 barrels per day in 2026, though it has lowered that forecast for a fifth straight month.
Saudi pipeline crisis strains finances
The supply risk JPMorgan is weighing centers on Saudi Arabia, whose east-west pipeline has been shut since an Iran-allied Iraqi militia attacked it at multiple locations. The kingdom is exploring an $8 billion loan from commercial lenders as the outage drags on. It was reported this week that Saudi Arabia could restore roughly half the pipeline's capacity within days — a scenario that assumes no further strikes.
Diplomacy opens on two fronts
Trump will meet Persian Gulf leaders in New York next week on the sidelines of the UN General Assembly, with talks expected to focus on postwar strategy even though Iranian officials have said they aren't interested in renewed negotiations until Iran's conditions are met. On Wednesday, Trump said he hoped the war was nearing its end.
Separately, US officials met over the weekend with representatives of Yemen's Ansar Allah at the American embassy in Muscat, the group commonly known as the Houthis. It committed to continuing to honor an Oman-brokered 2025 ceasefire with the US and to target only Saudi forces and Saudi-bound shipping, a factor in Washington's decision not to intervene militarily in Yemen on Saudi Arabia's behalf. Ansar Allah controls territory home to about 80% of Yemen's population, and fighting with Saudi Arabia has intensified since a four-year truce collapsed in July.
Sources: Oilprice.com, Commodities & Futures News
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