JP MORGAN CHASE(US:JPM)2025-06-23 13:16Investment Rating - The report does not explicitly provide an investment rating for the industry but indicates a baseline scenario for the Strait of Hormuz to remain open, suggesting a cautious outlook on geopolitical risks [4]. Core Insights - Geopolitical risks have increased following Israel's attack and Iran's retaliation, with potential disruptions in the Strait of Hormuz posing significant consequences for global oil and LNG supply [4][5]. - Approximately 20% of global oil and LNG supply passes through the Strait, with major producers, including Iran, heavily reliant on this route [4][5]. - The current market assigns a probability of less than 20% for a closure of the Strait, with oil prices potentially surging to $120-130 per barrel in the event of a full closure [1][4]. Summary by Sections Oil Exports and Reliance - The Strait of Hormuz is critical for oil exports, with a total of 21.2 million barrels per day passing through it as of May 2025 [6]. - Countries like Bahrain, Kuwait, and Qatar have no alternative routes, making them particularly vulnerable to disruptions [3][6]. - Saudi Arabia and the UAE have limited pipeline capacities to redirect some hydrocarbon flows, but disruptions would still have a major impact [3][7]. Economic Impact - Hydrocarbon activities account for about one-third of aggregated GCC GDP, with Kuwait being the most reliant and Bahrain the least [7]. - In 2024, net oil and gas current account revenues represented about 21% of GDP, with significant variances across GCC countries [7][11]. - A $10 per barrel increase in oil prices could improve GDP by approximately 2.6% for current accounts and 2.4% for fiscal balances [11]. Sensitivity to Oil Prices - Current higher oil prices, assuming no disruption, could benefit GCC balances due to high sensitivity to price changes [11]. - The report maintains a baseline Brent price forecast of $66 per barrel for 2025, with geopolitical premiums currently adding $10-12 per barrel [11][12]. Conclusion - The report concludes that while risks and uncertainties regarding oil prices and geopolitical stability are present, macroeconomic forecasts for GCC countries remain unchanged for now [17].