JP Morgan says it cannot model oil-price endgame from US-Iran war
JP Morgan has said it is struggling to forecast how oil prices will move as the US-Iran war continues, telling investors that it "simply don't know how to model the endgame". The bank said it had initially assumed the conflict would be constrained by economic limits and that a deal would reopen the Strait of Hormuz shipping lane by June. Instead, it said the conflict has extended beyond those expectations, leaving its baseline view uncertain.
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In its note, the bank pointed to a set of thresholds it had expected would act as red lines for the Trump administration. Those included oil rising above $100 a barrel, inflation reaching 4%, gasoline topping $5 a gallon and 10-year government borrowing costs hitting 5%. JP Morgan said several of those markers have now been crossed, including oil prices moving back above $100 in recent weeks and bond yields rising above 5%.
The comments matter because oil prices feed directly into inflation expectations, borrowing costs and wider market sentiment. The Strait of Hormuz is one of the world's most important shipping routes for energy supplies, so any disruption there can quickly affect global markets. The bank's assessment suggests investors are still trying to judge how far the conflict could spread economically, and how long the uncertainty may last.
The note also underlines the difficulty of modelling President Donald Trump's next steps in the conflict. JP Morgan said it had expected the administration to avoid crossing certain economic lines, but that assumption has not held. An oil and gas industry source described it as unusual for such a prominent investment firm to issue a note of this kind, while saying it reflected the current state of play.
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The bank's warning comes as markets continue to watch the relationship between the war, energy prices and US financial conditions. Higher oil prices can add pressure to consumer costs, while rising bond yields can make government borrowing more expensive. That combination can complicate policy decisions and increase volatility across asset classes.
What remains unclear is how long the conflict will continue and whether any agreement will reopen the Strait of Hormuz. JP Morgan said that six months after the war began, the exit strategy is less clear, not more. Investors will now be watching for any sign of de-escalation, changes in oil supply routes or further movement in inflation and borrowing costs.
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