Oil’s war premium leaves Brent crude roughly $20 above JPMorgan’s estimate of fair value. Analysts at Fitch Solutions unit BMI expect a steep sell-off once Washington and Tehran reach a preliminary Hormuz deal.

US Energy Secretary Chris Wright calls the spike temporary, yet BMI sees a Hormuz deal as likeliest in early 2027. Crude delivered to Asia averaged $131 a barrel in October, JPMorgan estimates.

How Much of Oil’s War Premium Is Fear Rather Than Barrels?

JPMorgan‘s model puts fair value for Brent at $94 a barrel, against a market price near $114. The bank’s analysts find no evidence that freight costs explain the gap, which leaves geopolitical risk as the likelier explanation.

Historically, stretches of more than 5% above that fair value lasted 3.8 months on average, per the same report. The bank concedes, however, that uncertainty can pull prices far from that level.

BMI projects Brent averaging $107 this quarter and $112 in the first quarter of 2027.

BMI expects a preliminary deal to trigger a steep sell-off. Rising OPEC and non-OPEC supply would then push Brent to an average of $67 in the fourth quarter of 2027.

What Could Keep the Premium Alive?

Meanwhile, Wright told Bloomberg that large US forces are escorting ships through Hormuz. He declined to forecast prices or give a cost for the operation.

He attributed elevated prices to a global refining shortage. BMI adds that refined fuels would recover more slowly than crude even after a deal.

However, BMI flags the opposite risk, since a return to high-intensity fighting could push prices above earlier war peaks.

Ole Hansen, head of commodity strategy at Saxo Bank, cites reports of potential US and Israeli strikes on Iran. Those would follow the November 3 midterms, while Israel’s election deadlock leaves the war’s direction uncertain.

JPMorgan puts Asia’s implied transport cost at $38 a barrel, against $13 for Europe. The cause is a tanker shortage driving costs higher.

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