The Strait of Hormuz remains the critical pressure point, with UBS estimating a shortfall of 12 million barrels a day and JP Morgan flagging a structural repricing of energy risk
Donald Trump told the nation that the United States is close to achieving its objectives in Iran but will continue striking the country hard for another two to three weeks, adding that energy infrastructure could become a target if Tehran refuses a deal.
The address did little to calm oil markets, with analysts at UBS and JP Morgan both warning that the disruption to global supply flows is deepening.
UBS said Trump's statement does not materially change the dynamic for oil and gas markets.
The risk of escalation remains, and the bank pointed to a specific threat that has not yet been acted upon: Trump reiterated that if Iran does not agree to a deal within the stated timeframe, the US would strike the country's power plants.
Iran has previously said that any attack on its own energy infrastructure would prompt retaliation against regional energy assets.
Hormuz remains the central problem
The Strait of Hormuz, through which roughly 14 million barrels of oil a day normally flow, stayed closed. Trump again said that countries reliant on oil transiting Hormuz should take responsibility for reopening it, and suggested the strait would open naturally once the conflict ends.
UBS said that even if US military operations stop, the pace at which Iran allows tankers to resume passage will be the deciding factor, and without a formal agreement, that could take time.
Bloomberg reported this week that Iran is constructing a system under which ships wishing to transit Hormuz would need to come from countries it regards as friendly, and may face transit fees.
Whether Gulf states would accept such terms is unclear. The Wall Street Journal reported separately that the UAE is in discussions with the US and other allies about opening the strait by force, according to Arab officials.
Supply shortfall growing
A month into the conflict, UBS estimates a supply shortfall of 12 million barrels a day against a pre-conflict flow of more than 20 million barrels a day.
Saudi Arabia and the UAE have redirected around 6 million barrels a day, and Iranian oil continues to flow through other channels. After accounting for emergency reserve releases, the effective shortfall narrows to around 9 million barrels a day, a figure UBS described as extremely large.
The bank estimates that global oil inventories have likely fallen to their five-year average at the end of March. If disruptions persist through April, stocks would drop below the bottom of the five-year range. UBS said prices could exceed $150 a barrel this month if there is no visible improvement.
European oil majors seen as undervalued
JP Morgan analysts said European oil stocks are up 20% in dollar terms since the conflict began, with share prices correlating more closely to one and two-year forward oil prices than to spot.
Fair value analysis by the bank suggests the majors are currently pricing in a long-term Brent price of around $70 a barrel.
Under a $100 a barrel scenario, similar to conditions seen during the Russia-Ukraine conflict in 2022, the 2026-27 free cashflow yield on the sector rises to 13%, against a long-term average of around 9.5%.
JPM said the structural mid-term implications of the US-Iran conflict are yet to be fully priced, and that an overt Middle East dependency on spare capacity justifies embedding higher long-term risk premia in oil and gas valuations.
JP Morgan carries 'overweight' recommendations on Shell, TotalEnergies, Eni and Galp.