JP Morgan Struggles to Model Endgame of US-Iran Conflict on Oil Prices

JP Morgan's commodities research team is struggling to forecast oil prices due to the ongoing US-Iran conflict. In a rare note, they admitted that 'we simply don't know how to model the endgame.' This reflects the uncertainty surrounding President Donald Trump's next moves.

The bank assumed at the start of the conflict that there would be 'economic red lines' that the administration would not cross, such as oil prices rising above $100 a barrel. However, many of these lines have been crossed since June, yet an exit strategy is less clear than ever.

JP Morgan estimated the 'fair value' for oil in September to be around $90 a barrel, despite it trading above $100. They also stated that the market is pricing in the risk of more disruption to trade due to the ongoing conflict with Russia and Ukraine.