Wall Street is confronting an unusually difficult oil-market call: there is no clear consensus on where prices go next. JPMorgan's energy team says the duration and eventual outcome of the Iran conflict can no longer be modeled with confidence. At the same time, crude has moved above $100 a barrel, the 10-year Treasury yield has entered the 5% range, and gasoline and diesel prices remain elevated, breaching several levels previously viewed as potential policy and economic pressure points.
JPMorgan withdraws its baseline oil view
The energy research team led by Natasha Kaneva had initially assumed that the US government would not tolerate oil above $100 a barrel, gasoline near $5 a gallon, headline inflation at 4%, or the 10-year Treasury yield moving into the 5% range. Those assumptions supported a view that the Strait of Hormuz could reopen around June this year.
Six months later, several of those assumptions have failed, while the path out of the conflict has not become any clearer. US gasoline is priced at $4.37 a gallon and remains at a seasonally adjusted record high, even though the traditional summer driving season has ended. Diesel has reached a record $6.31 a gallon, just as the Northern Hemisphere approaches its peak demand period and inventories remain at historically low levels.
Oil-market participants must now assess not only when the conflict might end, but also how shipping, refining capacity, energy inventories and US policy could interact. For now, the market lacks a widely accepted base case.
The duration of the Iran conflict remains decisive
It is still unclear whether the conflict will end within days, weeks or a longer period. Further escalation remains possible, as does a gradual de-escalation without a formal settlement. US President Donald Trump has said that oil and gasoline prices will not fall until after the November 3 US election, but the market has little clarity on what that would mean for Iranian energy facilities, shipping through the Strait of Hormuz or subsequent US policy.
Some energy-market participants expect Washington could take tougher action after the election, including measures targeting Iranian oil and energy assets. Such steps could lift prices in the short term. If the market simultaneously anticipates a future increase in Iranian exports, however, prices could later come under pressure. The outcome will depend on the specific policy measures and their effect on actual shipments, neither of which has yet been established.
Iran's economy and currency are under pressure, but the country has previously kept some oil moving through methods such as ship-to-ship transfers. The US has also used ship-to-ship transfers to move oil out of the Gulf region. As long as alternative transport and settlement channels remain available, the supply disruption may be less severe than initially feared.
What oil's failure to reach $150 means
Oil futures are currently hovering around $100 a barrel, while the cost of purchasing physical crude from the Middle East is higher. Saudi Arabia's major East-West Pipeline, which links the country's eastern and western coasts, was hit by drone attacks, and oil flows through the Strait of Hormuz are well below their levels at the start of the conflict. Even so, prices have not reached $125 or $150 a barrel, or moved beyond those levels.
That response suggests the market may be discounting the probability of a prolonged supply outage. Possible explanations include demand destruction, expectations that the conflict will end relatively quickly, confidence that Saudi engineers can repair the East-West Pipeline soon, or actual oil flows being higher than public records indicate. It is not clear which factor is dominant.
Still, the fact that oil remains near $100 despite several supply disruptions is itself a market signal. Traders may believe high prices will weaken demand further, or expect additional crude to return to the market in the coming months. A move to $150 is not inconceivable under a severe supply-shock scenario, but the market is not currently pricing that outcome.
Russian diesel adds near-term pressure
Diesel supply may pose a more immediate challenge to the global economy than crude. Russia is a major diesel-refining country, while continued Ukrainian attacks on some Russian refineries have reduced available supply.
Nominal diesel prices have reached record highs. On an inflation-adjusted basis, higher levels have been recorded in the past, but diesel prices in parts of Europe have surpassed $10 a gallon and continue to rise. Diesel is widely used in freight, agriculture, industry and power generation. Further price increases combined with tighter supply could therefore raise costs not only for energy companies, but also for logistics and manufacturing businesses.
Wall Street turns to Chevron and BP
With the main oil-market variables difficult to model, equity analysts are still revising their views on energy stocks. Chevron is among the large-cap producers receiving the most attention. Goldman Sachs reaffirmed its buy rating and raised its 12-month price target by $15 to $240. That target is above the Wall Street median of $223 and was about 17% above the share price at the time.
Venezuelan oil production is part of Goldman's assessment. The firm expects Venezuela's output could double to roughly 600,000 barrels a day by 2031 and also sees opportunities for Chevron in power generation. Chevron has a long-standing presence in Venezuela, and the pace of any production recovery, together with US policy toward energy cooperation, could affect how investors value those assets.
BP has also moved onto the radar of several firms. Evercore ISI added the company to its tactical outperform list while maintaining a $52 price target. Analyst Stephen Richardson said BP's balance sheet could change materially in the second half of this year. A better commodity-price environment and debt reduction could help narrow the valuation gap with peers.
BP has spent recent years expanding beyond oil and gas, but new Chief Executive Officer Meg O'Neill may continue steering the company back toward its traditional energy core. Investors are watching whether that shift can improve cash flow and the balance sheet while reducing the valuation discount associated with its transition strategy.
Crescent Energy draws interest among smaller producers
Rating changes have also reached smaller energy companies. Truist gave Crescent Energy a buy rating with a $19 price target. Analyst Gabe Daoud said the company trades at a profitability valuation discount to peers and can add resources with relatively limited capital spending.
Crescent Energy has a market capitalization of about $4.5 billion and operates mainly in Texas's Permian Basin and Eagle Ford shale region. The shares were trading at around $13 at the time. Truist's target was above the Wall Street median of $17.44, while Stephens had the highest target at $21. Investors will still need to assess whether free cash flow, capital expenditure and production growth can support those valuation assumptions.
Refiners rally as crack spreads widen
Refining companies remain the clearest equity theme in the energy sector. Refining stocks weakened early in the week as crude prices fell, but several have since moved back toward or set new highs. Valero, HF Sinclair and Marathon Petroleum reached record highs last week, while Phillips 66, Par Pacific, PBF Energy and Delek were trading near their own historical peaks.
The companies are benefiting from wider crack spreads, the difference between refined-product prices and crude prices. The measure is commonly used to gauge the relative profitability of turning crude into gasoline, diesel and jet fuel. As gasoline and diesel prices have risen, investors have reassessed refiners' earnings power, helping push the group sharply higher over the past several months.
Some refining stocks are now trading above Wall Street price targets, with Delek and Par Pacific among the few exceptions. A retreat in crack spreads or changes to policies governing refined-product flows could affect both company earnings and equity valuations.
Diesel export policy could reshape refinery margins
Whether the White House restricts or bans diesel exports is the next major policy variable for refiners. Citigroup has said calls for restrictions are growing, but a blanket ban could sharply reduce refinery margins and prompt lower operating rates, with knock-on effects for gasoline and jet-fuel prices.
A full export restriction could remove an important source of current refinery profitability, putting pressure on crack spreads and the rally in refining stocks. Energy-industry participants have raised a separate concern: diesel cannot be redirected as easily as some other refined products, and existing transport and distribution systems are highly regional. If refiners cut output to control inventories, supply could tighten and prices could face even greater pressure.
The policy impact will therefore depend not only on export volumes, but also on US refinery utilization, inventory changes, domestic distribution capacity and shortfalls in markets such as Europe. The market is still waiting for a clearer policy signal.
Higher freight costs raise the cost of supply
The price of crude is not the only variable to watch. The cost of transporting oil from producing regions to consumers is also rising rapidly, increasing the delivered cost of physical crude and refined products.
With tanker volumes through the Strait of Hormuz reduced and shipping routes and insurance arrangements disrupted, freight has become a more important component of energy prices. Even if futures prices do not make a sharp move higher, increased transport costs could squeeze refiners and traders while creating wider price differences between regions.
Venture Global Chief Executive Officer Mike Sabel also discussed the company's new gas agreement with China, rising US liquefied natural gas demand and the effect of Middle East supply disruptions on gas markets in an interview this week. With crude, diesel and LNG all being affected by shipping and supply constraints, energy companies continue to face sharply divergent pricing and margin conditions. For traders and end users, diesel availability, refinery utilization, export policy and freight costs remain as important as the headline crude price.