Here's the path to oil hitting $120 per barrel, according to JPMorgan

By Steve Goldstein

Saudi oil refinery, Ras Tanura, along the Gulf coast was targeted in an attack on March 2, 2026, a source familiar with the incident told AFP, as Iran launched a fresh barrage at countries across the region.

After an initial spike, oil prices have settled into a $5 to $6 increase after reopening for the first time since the U.S. and Israel attacked Iran.

The question is how high could oil go in the case of a sustained conflict.

Strategists at JPMorgan led by Natasha Kaneva, head of global commodities research, say the international Brent benchmark (BRN00) could surge to as high as $120. The West Texas Intermediate grade (CL00,) popular in the U.S., is trading at a $7 discount to Brent.

"Beyond the initial knee-jerk reaction, the trajectory of oil prices will ultimately depend on four variables: how many barrels are physically disrupted; how long the disruption lasts; in a prolonged disruption, whether credible replacement supply-including potential releases from strategic reserves-can be mobilized quickly enough to avoid a structural tightening of the global oil balance; and what comes next," says Kaneva.

The note was written before a drone hit Saudi Arabia's Ras Tanura refinery. Though it only caused limited damage, it was a sign of Iran's willingness to hit oil infrastructure in the region.

Kaneva and team flagged Iran retaliation as a risk of a drawn-out conflict.

"We estimate that if the conflict lasts more than three weeks, [Gulf] oil producers would exhaust storage capacity and would be forced to shut in production. Under this scenario, Brent could trade in the $100-$120 range. Given the timeline of these unknowns, we are not making changes to our existing price forecast at this stage," they said.

The analysts did note that the Strait of Hormuz is not formally closed, but tanker traffic has seized up due to higher premiums and the potential withdrawal of insurance coverage, not to mention crew safety concerns.

The spike in insurance rates could mean a vessel facing costs of $375,000 per voyage, from $250,000. Rerouting is possible but options are limited, they said.

"Across the seven Gulf producers reliant on Hormuz-Saudi Arabia, the UAE, Iraq, Kuwait, Iran, Qatar, and Oman-we estimate roughly 343 million barrels of available onshore crude storage capacity, excluding oil already at sea. At current output rates, that equates to about 22 days of stranded crude production," they say. Another 60 empty tankers could absorb another 50 million barrels, extending operations another three to four days.

Another interesting element of the note was the analysis of regime change in oil-producing countries.

"Since 1979, there have been eight notable instances of regime change in medium-to-large scale oil-producing nations, each with significant implications for global oil prices and supply dynamics. While demand conditions and OPEC's spare capacity significantly shape the overall market impact, these events typically lead to a substantial spike in oil prices, averaging a 76% increase from onset to peak," they say.

During the 1979 Iranian Revolution, prices surged from $13 per barrel to $34 in the mid-1980s. Even before the recent attack, Iran's production of 3.3 million barrels a day lags the 5.3 million achieved in 1978.

-Steve Goldstein

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03-02-26 0555ET