JP Morgan Admits Difficulty Forecasting Oil Prices Amid US-Iran Conflict

Investment banking giant JP Morgan has publicly acknowledged its struggle to predict how oil prices will be affected by the ongoing conflict between the United States and Iran. In a rare advisory to investors, the bank stated that it lacks a clear model for determining the endgame of the war.

At the outset of the hostilities, JP Morgan assumed the Trump administration would establish “economic red lines” that it would not permit Iran to cross. The bank anticipated these thresholds would force a diplomatic resolution and reopen the Strait of Hormuz shipping lane by June. The projected limits included oil exceeding $100 per barrel, inflation reaching 4%, gasoline prices topping $5 per gallon, and yields on 10-year government bonds hitting 5%.

However, analysts noted that while gasoline and inflation have stayed below their respective targets, oil prices have recently surged back above $100 and government borrowing costs have exceeded the 5% mark. “Six months later, many of those lines have been crossed, yet the exit strategy is less clear, not more,” the commodities research team wrote in their note. They added, “For the first time since the start of the Iran conflict, we don’t have a baseline view. We simply don’t know how to model the endgame.”

An oil and gas industry source described the bank’s candor as unusual for a firm of JP Morgan’s stature but confirmed it accurately reflects the current uncertainty surrounding the conflict. The unpredictability of President Donald Trump’s subsequent moves further complicates economic forecasting.

JP Morgan estimated the “fair value” for oil in September at approximately $90 a barrel, suggesting the current price above $100 prices in significant risk regarding further trade disruption. Additional supply concerns include actions by Yemen’s Houthis, who are backed by Iran and have seized territory at the mouth of the Bab al-Mandab Strait. The ongoing war between Russia and Ukraine also continues to impact global supply.

President Trump recently indicated that the conflict would likely persist until after the November midterm elections, claiming that oil prices would drop immediately following the vote. Meanwhile, high energy costs have contributed to rising living expenses globally. The US Federal Reserve raised interest rates this week, signaling potential increases through 2027 to combat inflation, a move Fed Chair Kevin Warsh justified by citing persistently high prices, despite Trump’s disagreement with the decision.

With “no clear signals” of de-escalation, JP Morgan analysts argued that the assumption of temporary global oil supply disruptions is becoming increasingly untenable.