JPMorgan's commodities team puts Brent crude's fair value at $94 a barrel, yet the benchmark has been trading near $114 — almost $20 above what fundamentals imply, according to a note from the bank's head of global commodities strategy, Natasha Kaneva. The gap, the bank says, reflects the market pricing in the risk of further escalation eight months into the war with Iran, even though Gulf oil exports have recovered to around pre-war levels at times. On Wednesday afternoon Brent was trading at about $111 a barrel.

Why the premium may not last

JPMorgan's analysts say they have never been fully comfortable with the idea of a geopolitical risk premium, because it is remarkably difficult to quantify, and history suggests such gaps close: sustained deviations of more than 5% above fair value have lasted on average just 3.8 months before prices converged back to fundamentals or slipped into a discount. BMI, meanwhile, expects a steep sell-off if Washington and Tehran reach a preliminary deal over the Strait of Hormuz, forecasting Brent averaging $67 in the fourth quarter of 2027 as rising OPEC and non-OPEC supply weighs, though it sees a deal as likeliest only in early 2027. US Energy Secretary Chris Wright has called the current spike temporary.

What could push prices higher instead

The same analysts warn the premium could also widen: renewed high-intensity fighting could push prices above earlier war peaks, and traders remain alert to possible US strikes on Iran after the 3 November midterm elections. With US petrol averaging $4.25 a gallon, according to AAA, the stakes for consumers are high either way. For now, the market is paying roughly $20 a barrel for insurance against a war getting worse — a premium JPMorgan's own model says history usually erases.

Sources: The Wall Street Journal, Rigzone, Binance News.