JPMorgan says it cannot forecast oil prices amid the US-Iran war

JPMorgan says it cannot predict how the US-Iran war will affect oil prices. In a rare note to investors, the bank’s analysts said they no longer know how to model the conflict’s endgame.

Oil has climbed back above $100 a barrel in recent weeks. Gasoline in the US remains below $5 a gallon, while inflation has not reached 4%.

At the start of the war, JPMorgan expected the Trump administration would avoid crossing certain economic thresholds and that a deal to reopen the Strait of Hormuz shipping lane would be reached in June.

JPMorgan’s economic thresholds

The limits identified by the bank included oil above $100 a barrel, inflation at 4%, gasoline above $5 a gallon and a 5% yield on 10-year government borrowing.

JPMorgan’s commodities research team said that six months into the war, many of those thresholds had been crossed, while the exit strategy had become less clear. The bank estimated oil’s “fair value” in September at about $90 a barrel, but said prices reflected the risk of further trade disruption.

Risks to oil supplies

The bank pointed to additional risks to Middle Eastern oil supplies, including the seizure by Iran-backed Houthis of an area near the entrance to the Bab al-Mandab Strait, another major international shipping route.

The continuing Russia-Ukraine war is also affecting the outlook. Analysts said that without clear signs of de-escalation, it was becoming increasingly difficult to maintain the assumption that global oil-supply disruption would be temporary.

US President Donald Trump said last week that he did not expect the war to end before the US midterm elections in November. He told reporters that oil prices would fall after the election.