JPMorgan warns oil prices could rise to $120/barrel

Oil drilling rigs

JPMorgan warned of a potential surge in Brent crude prices to $120 per barrel if oil supply faces more pressure in the coming months, a situation that could bring global economic growth to a near standstill.

Despite anticipating Brent crude prices to decrease to roughly $86 per barrel by year-end, the bank sees further pressure on oil supply to potentially elevate prices and further strain the global economy, according to a recent note.

JPMorgan said, "There is also a concern that the recent supply cuts are not finished, and the price of oil could jump much further to as high as $120/barrel," a level that equates to a 60% jump through the second half of the year.

If such a scenario were to occur in the following weeks and be entirely due to supply cuts, global inflation would rise to around 6% by year-end and drag down global GDP by 1.3% year-on-year (YoY) over the next two quarters, bringing the global economy to almost a halt in the coming quarter, the bank explained.

"Indeed, the cumulative 60% jump in the price of oil would mark the type of shock usually only seen ahead of recessions," JPMorgan added.