What We Know About JPMorgan's Struggle to Forecast Oil Prices

JPMorgan's commodities research team has told clients it no longer has a working forecast for oil prices as the United States' conflict with Iran continues, writing in a note that "we simply don't know how to model the endgame," according to BBC News reporting from New York.

The admission from one of Wall Street's largest banks is notable because JPMorgan rarely tells investors it cannot produce a baseline view, the BBC reported. An oil and gas industry source told the broadcaster the note was "unusual" for a firm of JPMorgan's standing but called it "a reflection on the state of play" given the uncertainty surrounding the war.

What did JPMorgan say about forecasting oil prices?

In the note cited by the BBC, JPMorgan's commodities analysts said that for the first time since the conflict began, the bank does not have a baseline view on where oil is headed. "For the first time since the start of the Iran conflict, we don't have a baseline view," the analysts wrote. "We simply don't know how to model the endgame." The bank added that "the market is on edge."

What 'economic red lines' did JPMorgan expect Washington to defend?

At the start of the conflict, JPMorgan assumed the Trump administration would treat certain economic thresholds as limits it would not allow to be crossed, according to the BBC. Those assumed red lines included oil prices climbing above $100 a barrel, inflation reaching 4%, gasoline topping $5 a gallon, and the yield on 10-year US government borrowing hitting 5%. The bank had believed those limits would be enough to force a deal reopening the Strait of Hormuz shipping lane back in June, the BBC reported.

Which of those thresholds have already been crossed?

Six months into the conflict, several of the assumed limits have been breached without producing the exit JPMorgan expected, the bank told investors, per the BBC. Oil prices have surged back above $100 a barrel in recent weeks, and the yield on 10-year US government bonds has ticked over 5%, the BBC reported. Gasoline remains below $5 a gallon and inflation has not yet reached 4%, according to the same reporting. "Six months later, many of those lines have been crossed, yet the exit strategy is less clear, not more," the commodities research team wrote.

What does JPMorgan think oil is actually worth?

Despite oil trading above $100 a barrel, JPMorgan's analysts estimated in the note that the "fair value" for the commodity in September would be closer to $90 a barrel, the BBC reported. The bank said it sees "no clear signs of de-escalation" in the conflict that would justify the current premium.

Timeline: the US-Iran conflict and oil markets

• June 2026 — JPMorgan had expected a deal to reopen the Strait of Hormuz by this point, based on its assumption that Washington would treat $100-a-barrel oil and other thresholds as red lines, according to the BBC.
• Six months into the war — Oil, at more than $100 a barrel, and 10-year Treasury yields, above 5%, have crossed the levels JPMorgan once assumed would trigger a resolution, the bank said in its note.
• Early September 2026 — The US Federal Reserve raised interest rates for the first time in more than three years, with Chair Kevin Warsh saying the move came because "inflation is too high and has been for too long," the BBC reported. President Trump disagreed with the Fed's decision, according to the same reporting.
• Mid-September 2026 — President Trump told reporters he does not expect the Iran war to end until after November's US midterm elections, saying, "Right after the election, oil prices are going to be tumbling downward. I think it's going to take a little bit longer than the midterm," the BBC reported.

Glossary

• Strait of Hormuz — A shipping channel between the Persian Gulf and the Gulf of Oman used to transport a large share of the world's seaborne oil; disruption there has been central to the price volatility described in JPMorgan's note.
• Fair value — An analyst's estimate of what an asset should be worth based on underlying supply, demand and risk factors, as distinct from the price at which it is currently trading.
• 10-year Treasury yield — The interest rate the US government pays to borrow money over a 10-year period; it is widely watched as a signal of inflation expectations and borrowing costs across the economy.
• Baseline view — A research team's central, most likely forecast scenario, used as the starting point for pricing models; JPMorgan said it currently lacks one for oil.

JPMorgan's note did not offer a revised timeline for when the conflict, or its effect on oil prices, might resolve, the BBC reported.