Brent crude is trading about $20 a barrel above JPMorgan’s estimate of fair value, with geopolitical risk seen as the likeliest driver. BMI, Fitch’s research arm, says that premium could fade quickly if the US and Iran reach a preliminary agreement on the Strait of Hormuz in early 2027. A renewed conflict after the US midterm elections, however, could push prices above their previous wartime high.
Brent trades about $20 above JPMorgan’s fair value
JPMorgan’s model puts Brent’s fair value at around $94 a barrel, compared with a market price near $114. The bank’s analysts say available data do not show transport costs rising enough to account for the roughly $20 gap, making geopolitical risk the more likely explanation.
JPMorgan also estimates that crude shipped to Asia averaged $131 a barrel in October. Historically, periods when oil prices have traded more than 5% above the model’s fair-value estimate have lasted an average of 3.8 months. The bank cautions, however, that uncertainty can keep prices significantly above or below estimated value for a time; fair value does not mean prices will return to that level immediately.
BMI sees scope for a pullback if a deal is reached
BMI forecasts average Brent prices of $107 a barrel this quarter and $112 in the first quarter of 2027. It expects a marked decline if Washington and Tehran reach a preliminary agreement on Hormuz in early 2027. With supply from OPEC and non-OPEC producers increasing, BMI projects Brent will average $67 a barrel in the fourth quarter of 2027.
US Energy Secretary Chris Wright has described the recent oil-price surge as temporary. He said US forces are escorting ships through the Strait of Hormuz, but did not forecast prices or disclose the cost of the operation. Wright attributed high prices to a global shortfall in refining capacity.
Renewed fighting remains a risk to prices
BMI’s forecast assumes tensions around Hormuz ease and supply grows. That outlook could change if the conflict escalates again after the US midterm elections. Concerns about disruptions to shipping and crude supplies could then sustain the war premium and push prices above their previous wartime high.
A Hormuz agreement remains a possibility, not an established outcome. For oil markets, the key questions are whether negotiations make progress and whether supply risks actually ease.