J.P. Morgan's Brent outlook implies a $13 recovery the market is not pricing
With ICE Brent front-month at $73 and the bank's Q3 target at $86, a substantial gap has opened between the forecast and the tape.
ICE Brent crude front-month fell to $73.08 on Wednesday (2026-07-01), roughly $38 below the $111 per barrel touched in mid-May (2026-05-12) as the Strait of Hormuz disruption was at its most acute. J.P. Morgan analysts, in a June report, forecast Brent averaging $86 per barrel in the third quarter of 2026 and $80 in the fourth, exiting the year near $78. The third quarter has just begun.5,3
"Our revised path remains materially above the forward curve in 2026," J.P. Morgan analysts wrote, indicating the futures strip is even more bearish than a forecast that already embedded a Hormuz reopening and a gradual restoration of Gulf production. The bank's $86 target for the third quarter and $80 for the fourth represent successive steps down from the highs above $100 that some analysts expected to persist through the second half. At $73.08 spot, the Q3 path implies a 17 percent rally from current levels.5
The bearish consensus is straightforward. The Strait has reopened, Gulf supply is returning, and months of triple-digit crude already destroyed enough demand that the physical recovery won't lift prices back toward the crisis highs. Bloomberg Intelligence survey data from May showed a majority of market participants expected Brent to average $81 to $100 per barrel over the next twelve months, a range now sitting well above spot and above what the forward curve is pricing.1
The supply normalization assumption is doing a lot of work. The EIA's May Short-Term Energy Outlook assessed collective shut-ins across Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain at 10.5 million barrels per day, roughly one in ten barrels of global supply. Restoring that volume requires re-pressuring wells, clearing export terminals and rebuilding downstream inventory chains. Analysts noted in the June report that early demand indicators from March were already suggesting consumption had begun adjusting even before supply restoration started.4,5
J.P. Morgan flagged something separate. As the conflict entered its fourth month, the analysts noted that "prices have become remarkably calm," a stabilization they linked to lessons from Covid and the 2022 price spike, when governments and consumers adapted to sustained disruption faster than markets expected. If demand adaptation was front-loaded during the crisis period, recovery in consumption may lag the supply normalization rather than coincide with it.5
J.P. Morgan's 2027 forecast compounds the picture. The bank put average Brent at $64 per barrel for 2027, described in the report as "below the forward curve in 2027." The futures strip currently prices next year above that level. If recovering Gulf barrels hit a market already conditioned to lower consumption, the result is oversupply in 2027 that the market has not moved to price in.5
When the disruption was most acute, analysts estimated the geopolitical risk premium baked into crude at $4 to $10 per barrel. At $73.08 on Wednesday (2026-07-01), identifying much premium remaining is difficult. That collapse is either fully warranted by a smooth supply return, or the selloff has moved ahead of the physical data — and J.P. Morgan's insistence on an $86 Q3 path suggests the bank views it as the latter.2
What would put the bank's call back in play: slower-than-expected Gulf production restoration through July (2026-07), showing up as global inventory draws rather than builds and pushing the forward curve toward backwardation. What would confirm the market's read: a rapid return of the majority of shuttered barrels before August (2026-08), combined with flat demand indicators from Asia and Europe, in which case J.P. Morgan's $64 average for 2027 starts to look less contrarian than directionally correct.5