Strait of Hormuz opening this month? 
A Debate Over the Strait and Demand Destruction
Fat Pitch
In their latest oil report, J.P. Morgan reiterates that their base case continues to assume the Strait reopens in June. They previously anticipated this happening “one way or another,” and despite the lack of an official agreement, they are refusing to budge on that timeline.
Because the blockade has persisted, they’ve officially updated their projected trajectory for global inventory usage. The timeline has shifted out by one month: JPM now explicitly notes that they expect visible inventories to reach critical stress levels in late June, approaching absolute operational floor levels by September.
Right now, both paper and physical markets appear incredibly comfortable with this prolonged closure. Volatility has collapsed, and Dated Brent’s physical premium over front-month futures has retraced from a frantic $36 in April to just $2 today.
Why? A combination of clandestine “hopping” vessels spoofing transponders, upside supply surprises from Brazil and Venezuela, and massive demand destruction (led by China taking a 3.8 mbd import hit) has cushioned the blow.
But this calm depends entirely on the calendar.
JPM warns that the alternative path is far less comfortable. If their June reopening assumption fails, each additional month of closure will lift average Brent prices by roughly $5 in 3Q26 and a massive $15 in 4Q26, driven by accelerating inventory depletion.
Conclusion: of course sell oil and buy $SPCX on track to achieve 1 trillion EBITDA any minute now.
The Wrong Question
Art Berman is correct that “When will Iran make a deal?” is the wrong question.
But he flunks the right question.
Berman’s Proposed Right Question
Q: Berman’s Proposed Right Question: “What does Iran need that it doesn’t already have?”
A: Berman’s Proposed Answer: Not much.
That’s ridiculous. Iran is in hyperinflation pain, people are suffering, and it is short of hard cash.
However, Iran has a shown propensity to ignore pain. Trump, by contrast, and like all bullies, is susceptible to pain. And Trump, unlike Iran, has midterm elections to worry about.
The True Right Question
Q: How much more pain can Trump put up with?
A: No one knows.
Unknown is where we will be until Trump capitulates.
I agree with JP Morgan that Trump will open the strait. But it won’t be by force. It will be by capitulation, when Trump has had enough.
What complicates the setup are Trump’s own previous statements on release of funds and surrender demands.
In addition, Trump wants to appease the warmongers, those who were against the war, and Israel simultaneously.
That’s mission impossible.
Iran Not on Verge of Collapse
I side with Brett. But that’s not the right question anyway.
What would force Trump’s hand is the correct line of thinking.
Trump will capitulate is my base position. Time is on Iran’s side. But if I am wrong, my fallback position is a catastrophic war.
In my alternate scenario, Iran would go after the region’s desalinization plants and oil infrastructure.
Iran has escalation capability well beyond what Trump can do. This is why we are in a ceasefire now, and why Trump repeatedly backs off threats.
Expect Surrender or a Catastrophic War
$300 billion was an opening salvo to make $30 billion look great.
Trump will wave the white flag and brag about it because Iran is not going to capitulate.
CENTCOM Lies
“All missiles intercepted” says CENTCOM.
Yeah right. Some missile were intercepted by the ground.
Timing
JP Morgan says they “expect visible inventories to reach critical stress levels in late June, approaching absolute operational floor levels by September.”
Q: Are June and September the right months?
A: Once again, nobody can say for sure.
But it’s not just “visible” inventories that matter. Does China have hidden inventories? Are we correctly counting inventories in the first place?
Real Shock Still Coming?
THE RESILIENCE THAT BOUGHT TIME
➡️ China slashed its oil imports by nearly 40 percent in May, offsetting up to a fifth of the lost supply.
➡️ The United States increased crude and fuel exports by more than 2 million barrels a day above last year’s average.
➡️ The Trump administration released 172 million barrels from strategic reserves at record speed, including 1.4 million barrels a day in a single week.
➡️ Gulf producers rerouted millions of barrels daily through pipelines to the Red Sea and Fujairah while a trickle of tankers still moved through the strait.THE BUFFERS RUNNING OUT
➡️ Global inventories are now drawing down at a record pace of 70 to 80 million barrels every single week.
➡️ US crude stocks have fallen to the lowest level in more than two decades.
➡️ Critical storage at Cushing, Oklahoma is approaching operational lows just as summer demand rises.
➡️ Analysts calculate the market has already lost the equivalent of a billion barrels of oil with no replacement in sight.THE BLOOMBERG WARNING
➡️ Greg Sharenow warned that you cannot keep tightening the system by 70 to 80 million barrels a week forever.
➡️ The buffers that absorbed the shock are now depleted and the market has little flexibility left.
➡️ Even relatively small new outages could trigger violent price spikes from here.
➡️ The anticipation of a quick peace deal has kept traders on the sidelines, but the physical hole in supply remains.
Goldman Sachs vs JP Morgan
The only way I see demand destruction bringing things into balance is a recession. That’s a statement, not a recession call.
But here is some other demand destruction, caused by high prices.
Question of the Day
Q: Will Brent crude hit $120+ before the end of 2026?
A: It depends on the timing of Trump’s surrender and what the true levels of oil reserves (seen and unseen) are.
Will the Strait Open this Year
Actually, it’s up to what deal is acceptable to both sides, but primarily the terms of Trump’s surrender.
Drop your sharpest analysis — I’m looking for a serious, high-signal discussion. No memes, no noise, no hype.
“We project the market to return to oversupply from September 2026 due to a lack of material damage to the regional oil infrastructure, rapid recovery in Middle East production, strong non-OPEC supply growth and potential OPEC output increases beyond pre-conflict quotas.”
There is no “high-signal” because there is no answer to many basic questions.
- Will the war escalate?
- What are the true levels of reserves?
- Will Trump and Iran make a deal before reserves hit critical levels?
- Are we in a guaranteed no global slowdown economy?
Fitch’s September projection presumes no war escalation, less damage than currently admitted, more oil inventories than widely believed, a quick reopening of the strait, sanctions off Iran, a meaningful ramp in Venezuela production, and no weakening global demand.
It’s a forecast that presumes everything will go right from here. Alternatively, demand destruction is so great we have oversupply by September.
It’s not physically impossible, but it is highly unlikely.
Trump’s Options Unchanged for Months
How everything plays out depends on what action Trump takes and when he takes it.
Trump still has the same three options he has had since the ceasefire started on April 7, 2026.
Trump’s Three Options
- Military Escalation
- Wait Iran Out
- Agree to a Deal Acceptable to Iran
Military Escalation Option Is Flawed
A military operation to remove Iran’s nuclear material could take years with no guarantee of success. Indeed, I would expect this to fail just like we failed in Afghanistan and Vietnam.
The US production of defense systems is running low. The US and the Mideast is defending against $30,000 drones with much more expensive options that are in short supply.
Importantly, it is Iran, not the US, with huge escalation threats. Iran, if attacked, could go after desalinization plants in the region. Literally, the entire nation of Saudi Arabia would have to evacuate in days if its desalinization plants were hit.
Trump seems resigned to the above facts, which is why a ceasefire is in place.
Trump has learned nothing from history. Iran has much higher tolerance for pain than Trump expected.
Never before has a blockade worked. It inevitably increases the resolve of those being attacked. In this case, Trump and Israel killed the Iranian leadership who were willing to negotiate.
Waiting Iran out is not an option because Iran has chosen to wait the US out. And Iran has a much higher tolerance for pain.
Agree to a Deal Acceptable to Iran
When you throw away every option that doesn’t work, you are left with options that will work. That is option three, no matter how distasteful.
It is Trump who is desperate for a deal, not Iran.
For discussion, please see Frustrated Trump Ups Terms for a Deal with Iran. What’s Going On?
Many see this as a sign of no deal. I suggest something else.
Also see Hello. We Are Again Discussing the Terms of Trump’s Surrender to Iran
It’s only a matter of time before Trump waves the white flag.
Note that a huge market pullback, if one is starting, will add more pressure on Trump even if oil stabilizes.
Regardless, there are many technical and fundamental reasons for oil to go in either direction from here.
What Are the Technical and Fundamental Outlooks for Oil Prices?
In case you missed it, please see What Are the Technical and Fundamental Outlooks for Oil Prices?
The technical picture is very clear, yet unresolved. There’s also a debate over reserves and fundamentals.
I discuss the technical picture as well as the Exxon view vs Anas Alhajji’s view on reserve drawdowns.
Alhajji says there is no crude drawdown. Click above link for discussion.
great post Mish I learned a lot thank you
If Iran attacked desalination plants, it would constitute genocide, but the UN would only squawk about it.
“The market keeps asking: “When will Iran make a deal?”
Wrong question”
The first question is what it will take for Israel to allow Trump to make a deal.
The second question is what assurances Trump will have to furnish to show he is dealing in good faith, as Iran would have to be foolish to believe a serial liar, con artist and sociopathic murderer of their children.
I didn’t realize that JPM was in cohoots with taco?
The nuclear issue is a pretext. Many nations enrich uranium without problems.
Pakistan got the centrifuge technology from The Netherlands/Germany.
It’s about leaving Israel as the only functional power in the Middle East.
All other countries have now been taken out GWOT) except for the Sultan/Emir family tyrants.
Israel has no independent agency.
Israel assuredly has leverage over most of Congress, not to mention The Jeffrey Epstein Home Video Library, which is assuredly very spicy.
Very.
The whole thing is odd. Trump, the dictator-wannabe, didnt realize he was dealing with dictators, who dont care about the Iranian population or any “suffering” or a media to satisfy. Trump knows he has to fold just before the worldwide system hits “no turning back” levels, and likely that is a lot later than everyone thinks. I mean, it has been 96 days and the gas stations are all open and prices are dropping. Its two chickens who think they are playing chicken but they are really not. What it looks like is an oil-demand recession, which Trump will never announce.
Actually, it is US administrations that don’t care about their population nor about any hardships — Trump has even articulated this explicitly. The Iranian, Chinese, and Russian leadership listen quite a bit more carefully than the US regime does.
There is nothing in the news the last three months but this nonsense. What isnt happening is the continued surge in crude and wholesale gasoline prices. Its like Trump told all the energy CEOs to not raise prices or feel the wrath of his DOJ enforcers.
And what does TACO do about it? Why should he care?
When you exclude the impossible, you’re left with what’ll happen. I think waiting Iran out and coming to an agreement acceptable to Iran are both impossible. Therefore it’ll be military escalation, especially since Israel can kick it off. The fact that the escalation will fail is beside the point. I don’t think Iran will target Arab desalination. They’ll target Israel’s desalination and energy infrastructure of the GCC and Israel. Take out the Saudi east-west pipeline and their Red Sea port. Hit Israel’s offshore gas rigs. Etc.
I think Trump will take the escalation option. We consider nuclear weapons off limits but Trump does not. He has never considered anybody or anything off limits to him.
Do you really believe the November election won’t be completely derailed by this administration? They know if they lose the House and the Senate they will be headed for prison before too long. They have no reason to follow the rule of law. Nothing is off limits and there doesn’t seem to be any checks or balances
The US has its 250th birthday coming up on July 4, and there are the World Cup games culminating on July 19. Trump is not going to sully these events with a capitulation. Also, the high SPR draw down rate can be sustained at least to mid July, meaning US “pain” won’t increase until then. So my bet is on option 2, no deal, at least until then. Status quo (with a dribbling of ships through the Strait) for 6 weeks, then re-evaluate.
Iran has been bullied by Britain, the US, and Israel since roughly WWII. One can easily imagine they have concluded that giving in to bullies just leads to more bullying. A lot of thoughtful anticipation & resourcefulness has gone into their defense & response to being sucker-punched by Bibi’s Bitch.
I think the Strait of Hormuz will remain under their control for quite a while.
There is also the factor that Iran has learned that no one is more dishonest and untrustworthy than a Israel-dominated US.
They are far more accustomed to the difficulties of war. Shortages, inflation, stupidity.
We are only accustomed to stupidity.
And you know what inflation brings? Disco. Prepare for panic and chaos.
“JPM warns that the alternative path is far less comfortable. If their June reopening assumption fails, each additional month of closure will lift average Brent prices by roughly $5 in 3Q26 and a massive $15 in 4Q26, driven by accelerating inventory depletion.”
So if it’s not open by June Brent Oil will jump $5 bucks a month starting in July, and two months later in September inventories hit the floor?
That has to be the most optimistic price ramp in the thick of an oil supply shock crisis that I’ve ever seen.
And because of that I can only conclude these guys are full of it.
Is Fitch worse or better?
At least you can state what Fitch requires, however unlikely.
“Fitch’s September projection presumes no war escalation, less damage than currently admitted, more oil inventories than widely believed, a quick reopening of the strait, sanctions off Iran, a meaningful ramp in Venezuela production, and no weakening global demand.”
It seems things are heating up with Iran again ATM, and as I stated before I don’t see a cool down until Lebanon and Gaza see no more warning. The fact that the US has bombed a few places in Iran the last two days is by definition an escalation.
That said, IMO, there will be no deal made this month. And it’s loooking more and more that Iran wants to send a signal to not only America, but the rest of the world that this isn’t gonna end until Iran says so (aka Iran gets what it wants). Israel not standing down in Lebanon or Gaza means things can stay as is, or get worse, and last till September or even longer.
However, I agree with you that eventually Trump will end up making a deal with, which will favor Iran, and will only be done once Trump understands force wont work.
JPM talking their book.
Israel is the key. They need time to solidify their control of south Lebanon. They will not allow any sort of peace deal until then. Even then Netanyahu may want the war to continue to divert attention away from Lebanon & Gaza.
I think they are very quickly running into long-term problems. International public opinion will not let them get away with genocide. We have been brought up for generations on the story of Jewish genocide in world war II and now we’re watching Israeli genocide like it’s just doing business for Israel
Since when did Israel care about international public opinion? It’s not as if that stopped Israel’s genocide in Gaza.
As long as Israel’s American thug enables it, Israel will continue to act like The Brat From Endor.
Israel has no independent agency.