The Biggest Concern in the Israel-Iran Conflict: Will the Closure of the Strait of Hormuz Push Oil Prices Past $100?

TradingKey - The outbreak of conflict between Israel and Iran has shaken off the recent weakness in international oil prices, which surged 10% last week. Wall Street is now focused on whether this new front in the Middle East could lead to the closure of the Strait of Hormuz — a critical global oil shipping route. J.P. Morgan warned that such a scenario could push oil prices to $120 per barrel.

Starting on June 13, the conflict between Israel and Iran erupted, with both sides launching multiple rounds of drone and missile attacks. On June 14, Iranian officials stated that they were seriously considering whether to block the Strait of Hormuz — a vital chokepoint through which 20% of the world’s crude oil and liquefied natural gas (LNG) is transported.

On June 13, J.P. Morgan issued a report stating that Iran is an important global crude oil supplier, accounting for about 4% of global oil production, but the real risk lies in the potential escalation of the conflict across a broader region or key transportation routes such as the Strait of Hormuz. The Middle East accounts for one-third of global oil production, and regional actors taking sides could further complicate the oil supply situation.

J.P. Morgan warned that the Israeli attack on Iran could cause oil prices to surge to $120 per barrel, assigning a 17% probability to this worst-case scenario. 

At the time of writing, WTI crude oil was trading at $72.25 per barrel, and Brent crude oil was at $75.13 per barrel.

The firm added that its base case still assumes oil prices will remain within a comfortable range of $60–$65 per barrel, as a sharp rise in prices could fuel U.S. inflation. President Donald Trump, who has pledged to lower energy costs, would not stand idly by in the face of rising energy prices.

J.P. Morgan also noted that the likelihood of a full blockade remains extremely low, as Iran would certainly pay a heavy price for such action: violating international norms could invite retaliation; it could be seen as a direct threat to the economic interests of many Gulf countries, and it would affect major customers such as China, India, Japan, and South Korea.

Analysts from Deutsche Bank also expressed concerns over the potential impact of a Hormuz closure on oil prices. They indicated that such a move, given its potentially catastrophic global implications, might only be considered by Iran as a last resort under extreme circumstances.