In a rare admission of uncertainty, investment banking firm JP Morgan has informed investors that it is currently unable to forecast the economic trajectory of the ongoing conflict between the United States and Iran. Analysts stated that they are struggling to model an "endgame" for the situation, noting that the market remains "on edge" due to the unpredictable nature of the geopolitical landscape.
At the onset of the conflict, the bank had operated under the assumption that the Trump administration would adhere to specific "economic red lines." These benchmarks included keeping oil prices below $100 per barrel, inflation under 4%, gasoline prices below $5 per gallon, and 10-year government bond yields under 5%. While gasoline and inflation figures remain below those thresholds, oil prices have recently climbed above $100 per barrel, and government borrowing rates have surpassed 5%.
"Six months later, many of those lines have been crossed, yet the exit strategy is less clear, not more," the bank's commodities research team wrote in a recent note. The firm added that it no longer maintains a baseline view on the conflict, marking a significant shift in its analytical approach.
President Donald Trump recently suggested that oil prices would likely remain elevated until after the upcoming midterm elections. Meanwhile, the Federal Reserve has initiated interest rate hikes to combat rising costs, a move that has drawn public disagreement from the President.
Beyond the US-Iran conflict, JP Morgan analysts highlighted additional pressures on global energy markets, including the ongoing war in Ukraine and the seizure of territory near the Bab al-Mandab Strait by Iranian-backed Houthi forces. With no clear signs of de-escalation in the Middle East, the bank noted that the previous assumption that global supply disruptions would be temporary is becoming increasingly difficult to support.
Source: BBC News
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