The Assumption Behind JPMorgan's Iran War Forecast Is Gone

JPMorgan has abandoned its baseline view of the war in Iran, telling clients it can no longer model the endgame.

Natasha Kaneva, the bank’s head of global commodities strategy, noted that many of the economic redlines it once trusted have been crossed. 

The Thresholds JPMorgan Thought Would Hold

The war began on February 28 and has now run into its seventh month. JPMorgan assumed that pain in oil, fuel, and bond markets would push President Donald Trump to strike a deal to reopen the Strait of Hormuz.

The bank had several thresholds in mind. Oil above $100, gasoline close to $5 a gallon, and the 10-year Treasury yield above 5%. 

Those thresholds have since gone. The 10-year Treasury yield crossed 5% this week, its highest in three years. US diesel hit a record $6.31 a gallon with inventories at all-time lows, Kaneva said.

An interim agreement did arrive in June. Fighting resumed within weeks, and escalation has continued since.

“For the first time since the start of the Iran conflict, we don’t have a baseline view,” Kaneva wrote. “We simply don’t know how to model the endgame.”

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The Bill Lands at the Pump

JPMorgan sees Brent’s fair value near $90, compared with its current price of around $105. According to Kaneva, each 1 million bpd of lost supply could add roughly $4 to futures prices. 

Current prices, therefore, imply about 4 million bpd in additional losses beyond the 10 million bpd already disrupted. 

Still, oil inventories may cushion the impact of a prolonged disruption. Stocks have fallen 555 million barrels, far below JPMorgan’s earlier 1.6 billion-barrel estimate.

“In short, there is still enough dry powder to keep prices contained — for now,” Kaneva said.

Meanwhile, the consumer burden has continued to increase. A Brown University tracker measuring pump prices against a no-war baseline puts the extra US fuel burden at $109.1 billion, or $832.48 per household. Gasoline has climbed 48.9% and diesel 74.3% since February.

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