• Bank says it has no baseline for oil prices as conflict drags on
• Brent crude remains above $100 as Hormuz disruption persists
• September fair value estimated at about $90 a barrel
JPMorgan has abandoned its baseline oil-price forecast, saying the prolonged US-Iran war has become too unpredictable for its analysts to model an endgame.
“For the first time since the start of the Iran conflict, we don’t have a baseline view. We simply don’t know how to model the endgame,” the bank’s commodities research team said in a note to investors.
The warning comes as Brent crude trades above $100 a barrel, with continued disruption around the Strait of Hormuz keeping a geopolitical premium in global oil prices.
Market Assumptions Have Broken Down
JPMorgan said it initially expected economic pressure to push the US administration towards an agreement that would restore shipping through Hormuz.
Its earlier assumptions included oil rising above $100 a barrel, US inflation reaching 4 per cent, gasoline exceeding $5 a gallon and the 10-year Treasury yield reaching 5 per cent.
Several of those thresholds have now been crossed without producing a clear resolution.
JPMorgan estimates September oil fair value at about $90 a barrel, below current market prices, suggesting that traders are paying a substantial premium for the risk of further supply disruption.
Hormuz Is the Critical Risk
The Strait of Hormuz remains central to the outlook because prolonged disruption could restrict crude and refined-product flows into international markets.
JPMorgan also flagged risks around the Bab el-Mandeb Strait, another major energy and shipping corridor, while the Russia-Ukraine war continues to affect global supply chains.
The bank said the assumption that current supply losses would be temporary is becoming increasingly difficult to sustain.
Inflation Risk Spreads Beyond Oil
The oil shock is also complicating the global inflation outlook.
Higher crude prices feed into transport, manufacturing and energy costs, potentially forcing central banks to keep monetary policy tighter for longer.
JPMorgan said global oil demand has fallen by more than 4 million barrels per day from last year’s level, helping to absorb some of the supply disruption.
But crude and refined-product inventories have also fallen by about 555 million barrels, reducing the buffer available if the conflict persists.
Trump’s Timeline Adds Uncertainty
US President Donald Trump has indicated that the conflict could continue beyond the November midterm elections, while saying oil prices could fall sharply once the war ends.
That leaves markets attempting to price an event whose duration and outcome remain uncertain.
For oil producers such as Nigeria, sustained high crude prices could support export earnings and government revenues. For import-dependent economies, the same shock could increase fuel costs, inflation and foreign-exchange pressures.
No Reliable Oil-Price Baseline
JPMorgan’s revised assessment is not a forecast that oil must remain above $100.
Its $90-a-barrel September fair-value estimate is below the current market price.
The key message is that geopolitical developments have overwhelmed the assumptions normally used to model supply, demand and prices.
Until there is greater clarity on the Iran conflict and shipping through key Middle East waterways, JPMorgan says it cannot establish a reliable baseline for the global oil market.
Source BBC