JPMorgan Abandons Iran War Forecast as Economic Thresholds Broken
JPMorgan Chase has abandoned its baseline forecast for the Iran war after six months of failed predictions. The bank initially modeled a war-ending scenario based on specific economic thresholds, including crude oil prices above $100 per barrel, gasoline prices near $5 per gallon, and a 10-year Treasury yield above 5%. These thresholds were meant to force President Donald Trump into an agreement to reopen the Strait of Hormuz by June.
However, with all three levels broken in August, and no subsequent deal reached, JPMorgan has withdrawn its forecast. The bank's head of global commodities strategy, Natasha Kaneva, explained that they 'simply don't know how to model the endgame' of the conflict.
The Iran war has had a significant impact on oil markets, with Brent crude trading near $105 per barrel and diesel reaching record prices. Despite the pain at the pump, consumer demand is also falling, with world consumption expected to drop 2.5 million barrels per day this year.
JPMorgan still runs arithmetic on the situation, estimating that every one million barrels per day of lost supply adds $4 to the futures price. However, the bank acknowledges that its previous predictions were based on a flawed assumption about President Trump's willingness to negotiate under economic pressure.