'We simply don't know' - JP Morgan struggling to forecast oil prices due to Trump's war with Iran
The bank said it "assumed" there would be economic red lines, like oil at $100 a barrel, that the US would be unwilling the cross.
JP Morgan, a major investment banking firm, is grappling with the difficulty of forecasting oil prices amidst the ongoing US-Iran conflict. In a rare note, the bank admitted, "We simply don't know how to model the endgame." The bank initially assumed that the Trump administration would be unwilling to cross certain "economic red lines" that could lead to a resolution, such as oil prices surpassing $100 a barrel, inflation reaching 4%, gasoline prices exceeding $5 a gallon, and 10-year government borrowing rates hitting 5%.
However, these red lines have since been crossed, yet the exit strategy remains unclear. Analysts noted the market's uncertainty and highlighted the risks to oil supply in the Middle East, with the Houthis seizing an area at the Bab al-Mandab Strait and the ongoing conflict between Russia and Ukraine. Despite oil prices not reaching the red lines, the bank stated that the situation is becoming increasingly difficult to sustain, as the assumption of temporary disruption is no longer holding.
Written by urgent.news from BBC World's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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