JPMorgan Drops Its Baseline Oil Forecast as Iran War Drags On

JPMorgan Chase has dropped its baseline forecast for oil markets, saying it cannot model how the Iran conflict will end. In a September 17 note, commodities strategist Natasha Kaneva and her team said the war had crossed key assumptions built into their earlier outlook.

That is not the same as stopping all analysis. JPMorgan put September’s “fair value” for Brent crude at about $90 a barrel, while prices were near $106 when the bank wrote its note. The difference reflected the risk of further supply losses, not a firm prediction of where prices would settle.

The bank had expected economic pressure to push Washington toward a deal to reopen the Strait of Hormuz. Its assumed warning points included oil at $100 a barrel, gasoline near $5 a gallon, inflation at 4% and the 10-year Treasury yield above 5%. Oil and bond yields had crossed their marks, but the conflict still had no clear exit.

JPMorgan estimated that about 10 million barrels a day of supply had already been disrupted. Yet demand has also weakened, and inventories fell by about 555 million barrels, roughly one-third of the draw the bank had expected. Those shifts have helped the market absorb lost supply without a lasting surge in crude.

Brent settled at $99.25 on September 22, after briefly slipping below $98. Hopes for a possible Hormuz reopening and the restart of Saudi Arabia’s East-West pipeline helped ease prices, but shipping through the strait remained severely constrained.

That leaves traders weighing new diplomatic signals against the actual movement of oil. On September 22, Iran signaled it could reopen the strait within a week if the United States eased pressure, while only two commercial vessels had passed through on Monday, compared with about 125 a day before the war.

For oil buyers and investors, JPMorgan’s change is a warning that its earlier timetable no longer fits the facts. The next clues are whether negotiations produce a lasting reopening and whether more crude reaches export routes, not simply what either side promises.