Jarden has increased its oil and LNG price forecasts and upgraded Australian energy stocks in response to recent military actions in the Middle East. These actions have effectively closed the Strait of Hormuz, a critical chokepoint, potentially disrupting approximately 20 per cent of global oil and LNG supply. According to Jarden analyst Nik Burns, the market is underestimating the impact of this disruption, viewing it as a temporary delay rather than a significant event.
Despite the supply concerns, Brent crude prices initially saw a modest increase, rising 14 per cent to US$83 by the close of trading on the ASX. This muted response has been attributed to market caution, high inventory levels in China and Japan, and assurances from the US regarding the conflict’s timeline. However, Jarden cautions that expiring war-risk insurance and Iranian threats to shipping could intensify pressure on prices in the near term. Jarden is a financial services firm providing investment banking, asset management, and wealth management services.
Jarden has outlined several scenarios, including a rapid de-escalation within three weeks. Their base case anticipates a six-to-eight week conflict, with Brent crude averaging US$90 per barrel in 2026. A prolonged two-month closure of the Strait of Hormuz could push Brent prices above US$150 per barrel. Spot LNG prices are also expected to rise, potentially exceeding US$30 per mmbtu in the latter two scenarios.
These forecast adjustments have led to upgrades for several Australian energy companies. Woodside Energy’s target price has increased by 30 per cent to $34, Santos is up 36 per cent to $8, and Karoon Energy has seen a 60 per cent increase to $2.50. Origin Energy has also been upgraded to $12.60, representing a 5 per cent increase. Beach Energy remains Underweight at $1.10, primarily due to operational constraints. Jarden suggests the conflict could create a long-term premium for energy assets located outside the Middle East, potentially benefiting companies with diversified geographic exposure.
