The spike in oil prices after U.S. and Israeli strikes on Iran may have limited impact on the world economy, according to Michael Cembalest, chairman of market and investment strategy at J.P. Morgan Asset Management.
Cenbalest acknowledged that Iran’s closure of the Strait of Hormuz, where 20 percent of the world’s oil consumption transits, has led to jumps in Brent crude oil and European gas prices. As of Wednesday, Brent oil was trading around $78 per barrel, an 11 percent hike in the past five days. And the price of oil has been creeping up since fears of a US/Israel attack on Iran emerged in January. The price of Brent crude is up almost 30 percent year to date.
But those prices are still below the levels seen during the 2022 inflation surge, and Cembalest is somewhat sanguine. “I would not be surprised to see only modest GDP contractions due to temporary oil and gas price spikes,” he said.
One reason is that oil isn’t as big of a component of global GDP as it used to be. “In many countries, the oil intensity of GDP has fallen in half since the 1990 Gulf War,” he said. “Gas and coal intensities of GDP fell as well, although by a lesser extent. “
Cembalest said the shift is “a by-product of more energy efficient machines and vehicles, and displacement of coal by more efficient natural gas turbines and furnaces for electricity and thermal heat in most places except China.”
Also, only three percent of global natural gas is transported through the Strait of Hormuz. “Natural gas is still primarily consumed where produced or sold cross-border via pipelines; for all the focus on LNG, it’s still just 14 percent of global gas consumption,” he explained. (Iranian drone strikes also forced Qatar to halt natural gas production this week.)
Cembalest noted that imported natural gas does make up 90 to 100 percent of natural gas consumption in several countries, including Japan, Korea, Taiwan, France, Portugal, and Belgium.
One negative Cembalest pointed to is that while the U.S. is a net exporter of oil, the country’s. Strategic Petroleum Reserve, designed to address geopolitical issues like the Iran war, is much lower than usual. That’s due to a Biden Administration decision to heavily draw upon it during the recent bout of inflation. In 2010, the reserve held about 725 million barrels of oil but now has less than 450 million barrels.
The J.P. Morgan strategist made these comments in his annual energy paper, which also addressed the growth of decarbonization and power usage of data centers for AI purposes.
Despite the Trump administration’s attempt to roll back environmental and clean energy mandates, he said that “global GDP is now growing much faster than global CO2 emissions.” In part that’s because of the decline in energy importance to GDP, he said, but “in principle, the pace of decarbonization should increase given the pace of global clean energy investment relative to fossil fuel investment.”
One caveat is the rising impact on energy usage by AI. Cembalest pointed to one study in the state of Virginia that found that “data center entry into a local market increases marginal electricity prices by $2.58 per MWh, a 7.3n percent increase.”
There is a growing “data center backlash” in several states that aims to apply higher electricity rates to data centers, Cembalest noted, mentioning legislation and other efforts in seven states, including Texas and California. But those efforts may not be enough to keep rates from spiking, he said. He cited a WoodMackenzie 2025 report that concluded that new specialized rates for data centers may not be high enough to cover the cost of new energy generation.
OpenAI alone has announced four partnerships that require 30.5 gigawatts of new power, Cembalest said. “To put this in context, that’s about 75 percent of peak nuclear gigawatt completions over five years during the U.S. nuclear era just for one company in the AI ecosystem,” he explained. In total, he said “data centers may boost U.S. gas demand by 3 to 4 billion cubic feet per day by 2030,” which called a “meaningful addition” given that the U.S. produced about 107 billion cubic feet per day in 2025.
That said, not all of this may come to pass.
At least 25 U.S. data center projects were canceled in 2025 following local opposition—four times as many as in 2024, according to Cembalest. “These canceled projects accounted for at least 4.7 gigawatts of electricity demand, a meaningful share of data center capacity projected to come online in the coming years.”
