JKM Nears Morgan Stanley's $25 Target as Middle East Demand Shock Muddies Supply Outlook
Asian LNG is within cents of Morgan Stanley's forecast even as the Middle East conflict destroyed close to 2 million barrels per day of regional oil demand.
JKM Asian LNG traded at $24.81 per million British thermal units on Friday (2026-09-11), within reach of the $25 target Morgan Stanley set when it projected prices could jump more than 30% on the back of Asian heat and European restocking demand.3
That it sits there amid severe demand destruction across the Middle East shows how much supply uncertainty the conflict has injected into global energy markets. JP Morgan data showed regional demand fell by 1.9 million barrels per day compared with year-ago levels, nearly triple the 0.6 million barrel per day decline the bank had initially forecast, as physical supply was still landing.2
The geographic spread of the shock surprised analysts. Middle East buyers pulled back first, but by late March the adjustment had reached East Africa and North Africa — the last Hormuz cargo arrived in East Africa on March 28 (2026-03-28) and North Africa on April 14 (2026-04-14), with demand there falling by 200,000 barrels per day.2
ICE Brent crude front-month sat at $105.11 per barrel on Friday (2026-09-11), up 0.59% on the session, well above the most bearish bank forecasts issued just weeks prior. Morgan Stanley cut its Brent outlook to $75 per barrel on June 30 (2026-06-30), citing an expected reopening of the Strait of Hormuz and the resulting supply glut. Citigroup went further, warning Brent could fall to $60 by year-end if flows normalize and a U.S.-Iran deal materializes.5,6
Neither scenario has materialized. A Reuters survey published August 31 (2026-08-31) showed analysts still expected the global oil market to run in deficit through 2026, with estimates ranging from 1.65 million to 3.5 million barrels per day, reflecting how uncertain the Hormuz calculus remains.7
Before the conflict, Morgan Stanley's supply-demand balances pointed to a 2 million to 3 million barrel per day surplus for 2026. The Strait closure temporarily flipped that into a deficit. Whether Hormuz traffic has normalized fast enough to restore the surplus sits at the center of every current oil price argument.4
The LNG picture is less contested, at least for now. Morgan Stanley forecast the Asian benchmark climbing to $25 per million British thermal units, driven by Asian heat and European gas storage restocking, with prices potentially rising more than 30%. JKM's position at $24.81 on Friday (2026-09-11) suggests the directional call is tracking.3
China sits at the intersection of both stories. It was among the first to sharply reduce Middle East crude purchases as the conflict unfolded, contributing to the demand destruction JP Morgan tracked through March (2026-03). But Chinese appetite for LNG drives JKM strength directly, and the cross-commodity chain linking Chinese gas demand to JKM, Brent, and Newcastle coal means a Chinese demand recovery would shift balances across multiple markets at once.
JP Morgan's downward revisions to April and May 2026 demand estimates followed "unexpectedly weak March demand data," the bank said, suggesting the pullback ran deeper than the initial conflict shock alone.2 Saudi Arabia's fiscal position adds another dimension: analysts estimate the kingdom needs oil above roughly $100 per barrel to avoid a deficit once off-budget sovereign-wealth fund spending is counted.1 With Brent at $105.11 on Friday (2026-09-11), Riyadh has almost no cushion if Hormuz supply recovery accelerates faster than current pricing implies.
The signal over coming weeks is the pace of Chinese demand recovery. An LNG benchmark sustained near $25 per million British thermal units would sharpen the economic case for new supply and infrastructure commitments across Asia. Whether April-May's weakness was a temporary conflict shock or the beginning of a more persistent slowdown in Chinese industrial demand shapes the energy market balance for the remainder of 2026.3,2