JP Morgan raises the "worst-case scenario probability" to 17%: If the Strait of Hormuz is closed, oil prices will rise to $120

The situation in the Middle East has escalated again, and oil prices are on the brink of a cliff. According to CCTV News, on the 14th, two oil refineries in Bushehr Province, southern Iran, were attacked by Israeli airstrikes, resulting in an explosion and fire at the South Pars Refinery's Phase 14 project facilities, while the Fajr Jam Refinery was also attacked. According to news from the Wind Trading Desk, a recent report released by JP Morgan's commodity analyst Natasha Kaneva shows that within just one day, the bank's probability forecast for the "worst-case scenario" surged from 7% to 17%—indicating that the likelihood of the Strait of Hormuz being closed and oil prices skyrocketing has more than doubled. Kaneva pointed out that the geopolitical premium is already $10 higher than the fair value of $66 derived from its model, indicating a 17% probability of the worst-case scenario occurring. Wall Street Journal previously mentioned that under the "worst-case scenario" set by JP Morgan, the response of oil prices could shift from linear to exponential, with supply impacts potentially exceeding the reduction of 2.1 million barrels per day in Iranian oil exports, pushing oil prices to $120-130. The Strait of Hormuz Becomes the Focus The Strait of Hormuz— a vital passage for 20% of the world's oil supply— has become the focus of market attention. However, Natasha Kaneva admitted that her "comfort zone" remains at $60-65 per barrel, as persistently high energy prices could reignite inflation, reversing the trend of cooling consumer prices in the U.S. over the past few months. This contradicts Trump's campaign promise to "quickly defeat inflation, lower prices, and stimulate explosive economic growth." She analyzed that if geopolitical policies further push up oil prices, Trump may prioritize maintaining low energy prices to avoid a severe blow to the domestic economy and voter confidence. Kaneva noted that it is necessary to consider Iran's retaliatory actions but believes the risk of the Strait being closed is very low, mainly because such a situation has never occurred. Deutsche Bank energy analyst Hsueh outlined three possible pathways for supply disruptions in his report, each of which could push Brent crude prices above $100. At the same time, Hsueh has preset a moderate reduction in Iranian oil exports and production by the end of the year, with a decrease of 400,000 barrels per day (-25%), but he acknowledged that the worst-case scenario could lead to a sharp decline in Iranian oil production. Regarding the scenario of the Strait of Hormuz being closed, Hsueh also believes that given the significant global impact of such a blockade, Iran is likely to consider it as a last resort, only in extreme circumstances. Hsueh added that although the closure of the Strait is seen as Iran's "last resort," the current uncertainty in the situation (including Israel's subsequent actions, the intensity of Iran's retaliation, and the level of U.S. involvement) is bringing this risk closer to reality. Hsueh further cited estimates from retired U.S. Navy Admiral James Stavridis in 2018, stating that if the Strait were closed, reopening it could take weeks to two months, during which the global energy market would be thrown into chaos Market pricing shows there is still distance from extreme scenarios The current Brent futures price curve indicates that the market has only partially priced in moderate risk scenarios and has not yet reflected the possibility of the closure of the Strait of Hormuz. Deutsche Bank stated that the market positioning is insufficiently prepared for the worst-case scenario, and if the conflict continues to escalate, it may trigger sharp fluctuations in oil prices at Monday's opening. Meanwhile, gold, as a safe-haven asset, has shown potential for an increase, and Commodity Trading Advisors (CTA) are closely monitoring opportunities for oil prices to break through trend lines