Investors Expect Iran War to Keep Energy Prices Elevated Over the Next Year

More than half of investors surveyed by JPMorgan expect disruptions in the Middle East to keep energy prices structurally elevated over the next 12 months, according to a report published by Fortune.

Investors expect prolonged Middle East disruptions to keep energy prices elevated as oil producers expand alternative export routes. [Photo: GolsaGolsa, Wikimedia Commons]

The outlook reflects continuing uncertainty over oil supplies, shipping routes and the risk of further escalation in the conflict involving Iran.

Even if supply constraints persist for another year, JPMorgan analysts said weaker demand could help keep oil prices near $90 a barrel, limiting the possibility of a surge to the $120-to-$140 range feared by some market participants.

“Repeated supply shocks are driving a lasting reconfiguration of trade routes and energy corridors, and tail risks remain elevated,” the analysts wrote.

“Building resilience in supply chains has become a priority.”

Alternative pipelines and port infrastructure are expected to play an important role in reducing the vulnerability of oil shipments to disruptions around the Strait of Hormuz.

Hamad Hussain, a senior commodities economist at Capital Economics, said in a research note last week that expanding pipeline capacity and export facilities could improve the resilience of regional oil flows over the longer term.

Some measures could also provide additional transport capacity in the short term. Saudi Arabia is reportedly planning to convert an existing natural gas pipeline to carry oil at a rate of approximately 1.2 million barrels a day.

Hussain estimated that the change could strengthen the kingdom's ability to transport oil to its western coast within six to eight weeks.

The proposed conversion would provide another route for moving crude oil toward the Red Sea, reducing reliance on the Strait of Hormuz.

However, the projected timing and volume depend on engineering work, operational requirements and the availability of oil to transport.

The outlook for energy prices will ultimately depend on several factors, including the duration of the conflict, the scale of any supply interruptions, global demand and the speed at which alternative transport infrastructure becomes available.

While investors broadly anticipate higher energy prices, the range of possible outcomes remains wide. Continued demand weakness could limit price increases, whereas a major disruption to oil production or shipping could intensify upward pressure.