Challenges in JP Morgan's Oil Price Predictions
The investment banking giant JP Morgan announced that it is struggling to predict the effects of the war between the US and Iran on oil prices. In a rare note to investors, the bank stated, "We cannot foresee how the outcome will unfold." Initially, JP Morgan had assumed that the conflict would not exceed economic boundaries, and therefore believed that an agreement would be reached in June regarding the opening of sea routes in the Strait of Hormuz.
The bank had set economic red lines such as oil prices exceeding $100 per barrel, inflation reaching 4%, gasoline prices surpassing $5 per gallon, and 10-year government bond yields exceeding 5%. JP Morgan analysts emphasized uncertainties by stating, "The market is in a tense situation."
As JP Morgan is a significant name in the financial world, the acknowledgment by the investment bank's experts that they are struggling to understand the economic impacts of the US-Iran conflict indicates the seriousness of this uncertainty. A source from the oil and gas sector noted that it is unusual for such a high-profile investment firm to publish such a note, stating that it reflects the current challenges.
The rise in oil prices is causing an increase in the cost of living in the US and around the world. Although gasoline prices have not yet exceeded $5, oil prices have risen above $100 in recent weeks. The US Federal Reserve raised interest rates for the first time in over three years this week and signaled that this increase could continue. JP Morgan stated that the "fair value" of oil for September is around $90, but the market is pricing in the risk of further disruptions to trade.
Analysts expressed that there are more risks to oil supply in the Middle East, such as the Iranian-backed Houthis seizing an area in the strategic Bab el-Mandeb Strait, and that the impact of the Russia-Ukraine conflict continues. They emphasized that the assumption of temporary disruptions in global oil supply is becoming increasingly difficult.
Source: BBC Business
