'We simply don't know' – JP Morgan struggling to forecast oil prices due to Trump's war with Iran

ByMichael Race Business reporter, Reporting fromNew York.

Key points

• In JP Morgan's note, analysts remarked it estimated the "fair value" for oil in September would be around $90 a barrel, despite it trading above $100.
• US President Donald Trump remarked last week he did not think the Iran war would end until after November's midterm elections in the US.
• Though Trump disagreed with the decision, fed Chair Kevin Warsh remarked the move was as "inflation is too high and has been for too long".
• Analysts cited further risks to oil supply in the Middle East, with Yemen's Houthis.
• For the first time since the start of the Iran conflict, we don't have a baseline view.

Investment banking giant JP Morgan has remarked it is struggling to predict how oil costs will be impacted by the US-Iran war, telling investors in a rare note that "we simply don't know how to model the endgame".

In practice, the bank remarked it assumed at the start of the conflict that there would be "economic red lines" that the Trump administration would be unwilling the cross, and therefore it believed a agreement would have been struck to open up the Strait of Hormuz shipping lane back in June.

It remarked such red lines included oil costs rising above $100 a barrel, inflation reaching 4%, gasoline topping $5 a gallon and rates on 10-year administration borrowing hitting 5%. "The market is on edge, " analysts remarked.

JP Morgan is a massive name in the financial world, so for the investment bank to admit its experts are grappling with working out the economic impact of the US-Iran conflict reflects the tricky nature of trying to predict President Donald Trump's next moves.

In practice, an oil and gas industry source informed the BBC it was "unusual" for such a high-profile investment firm to problem such a note, but continued it was a "reflection on the state of play", given the uncertainties around the conflict.

Investors often create investment decisions on inflation expectations and the rate of oil is a major factor in rates rising throughout the world, given the commodity's widespread employ and humanity's dependence on it.

While gasoline remains below $5 and inflation has additionally not reached 4%, oil costs have surged back above $100 in recent weeks and the interest rate – known as a yield – on administration bonds. It are issued in order for the US to borrow capital from financial markets, has ticked over 5%.

"Six months later, many of those lines have been crossed, yet the exit strategy is less clear, not more, " remarked the commodities research team at JP Morgan in note.

"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."

How Trump and the oil markets move in sync: A tango in five charts. US borrowing costs hit fresh highs over inflation fears.

"Right after the election, oil prices are going to be tumbling downward, " Trump remarked to journalists last week. "I think it's going to take a little bit longer than the midterm."

High oil rates have been behind the rising cost of living in the US and worldwide, with fuel and energy costs surging ahead of the colder months.

Notably, the US central bank, the Federal Reserve, raised interest rates this week for the first time in more than three years and signaled they could be rose further this year and into 2027 in a bid to slow rising costs.

Though Trump disagreed with the decision, fed Chair Kevin Warsh remarked the move was as "inflation is too high and has been for too long". 'No clear signs of de-escalation'.

But it remarked "the market is pricing in the risk" of more disruption to trade.

Analysts cited further risks to oil supply in the Middle East, with Yemen's Houthis. It are backed by Iran, seizing an area at the mouth of the waterway in the Bab al-Mandab Strait, which is another key international shipping route.

In practice, the conflict between Russia and Ukraine additionally continues to have an impact.

Analysts remarked with "no clear signals" of the war de-escalating, the assumption that global oil supply disruption was temporary is "becoming increasingly difficult to sustain".

In short, ' We simply don' t know' – JP Morgan struggling to forecast oil prices is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.