JPMorgan drops Iran war endgame forecast as economic thresholds breached

JPMorgan has given up its core outlook for the conflict in Iran, informing clients that it is unable to project a conclusion.

Natasha Kaneva, who leads the bank’s global commodities strategy, pointed out that numerous economic thresholds the firm previously relied on have been surpassed.

The markers JPMorgan expected would remain intact

Fighting started on February 28 and is now in its seventh month. The bank had believed that distress in oil, fuel and bond markets would compel President Donald Trump to negotiate a resolution that would reopen the Strait of Hormuz.

JPMorgan had identified specific markers: crude oil exceeding $100, gasoline approaching $5 per gallon, and the 10-year Treasury yield surpassing 5%.

Those thresholds have now been passed. The 10-year Treasury yield surpassed 5% this week, a level not seen in three years. Diesel in the US reached a record $6.31 a gallon while stockpiles were at historic lows, according to Kaneva.

A temporary truce was reached in June. Hostilities resumed a few weeks later, and tensions have kept rising since then.

“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.”

The cost shows up at the fuel station

The bank estimates Brent’s fair price at roughly $90, whereas it currently trades near $105. Kaneva stated that each 1 million barrels per day of disrupted supply could add about $4 to futures.

Consequently, current prices suggest approximately 4 million bpd of extra supply loss on top of the 10 million bpd already affected.

However, oil reserves might temper the effect of an extended disruption. Reserves have dropped by 555 million barrels, well under the bank’s prior projection of 1.6 billion barrels.

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

At the same time, the cost to consumers keeps rising. A Brown University gauge that compares pump prices with a peacetime benchmark calculates the additional US fuel expense at $109.1 billion, equivalent to $832.48 per household. Gasoline is up 48.9% and diesel 74.3% since February.