JPMorgan's Kaneva: Oil Models No Longer Predictive
JPMorgan's Head of Commodity Strategy, Natasha Kaneva, and her team have publicly stated that as the Trump administration continues to breach previously set economic red lines in the Iran conflict, the bank's oil analysis team has abandoned predictions on when this war will end.
Kaneva stated: "We have no idea how to model the endgame of this conflict," and noted, "This is the first time since the outbreak of the Iran conflict that we do not have a clear benchmark judgment."
JPMorgan had previously set several economic red lines considered "unbreachable": oil prices exceeding $100 per barrel, gasoline prices nearing $5 per gallon, and 10-year U.S. Treasury yields surpassing 5%; however, according to Kaneva, "Six months have passed, and most of these red lines have been breached, with exit strategies being less clear than before, not clearer."
Specific data shows that Brent crude is trading at about $106 per barrel, significantly higher than the bank's September estimate of about $90 as "fair value"; WTI crude is also above $100 per barrel; U.S. gasoline prices are reported at $4.37 per gallon; and diesel prices have reached $6.31 per gallon, setting a historical record. During the same period, the 10-year U.S. Treasury yield has surpassed 5%.
The conflict has lasted six months and has entered its seventh month. JPMorgan had previously anticipated that the conflict would force parties to reach an agreement, with the Strait of Hormuz reopening as early as June, but currently, the strait is effectively closed to transiting vessels, with daily traffic dropping to single to double digits, down from over 120 vessels before the conflict.
The supply side has also been impacted, with the Houthi forces in Yemen seizing a key port city, and militia groups in Iraq attacking Saudi Arabia's east-west oil pipeline, causing it to shut down, affecting pipeline capacity by 7 million barrels per day; it is estimated that the conflict has led to a global daily oil supply loss of about 10 million barrels, with global inventories having consumed about 555 million barrels, only about one-third of JPMorgan's initial forecasted decline, while global oil demand is down by over 4 million barrels per day compared to the same period last year.
From a market mechanism perspective, a Pentagon inspector general report shows that U.S. military equipment losses have reached $3.7 billion, including nearly 60 aircraft; meanwhile, calls within Congress to end the war are growing, with seven Republican lawmakers joining Democrats in support of related bills in the latest vote, up from four previously. High oil and diesel prices benefit oil-producing countries and energy companies, while rising inflation expectations and Treasury yields exert cost pressure on ordinary consumers and businesses reliant on energy imports. The U.S. Treasury yield surpassing 5% also indicates that the market is re-pricing for the long-term nature of this conflict and the inflation risks it brings.
Source: Public Information
ABAB AI Insight
JPMorgan's commodity strategy team has historically played a role in setting "predictive red lines" during major geopolitical conflicts, such as during the early stages of the Russia-Ukraine conflict in 2022, when the bank also provided oil price scenario forecasts and continuously adjusted benchmark assumptions as the conflict evolved. This time, led by Natasha Kaneva, the team has publicly acknowledged the absence of a benchmark judgment, a rare admission that reflects the unpredictability of this conflict exceeding the institution's usual modeling framework capabilities.
In terms of resource consumption, this conflict has directly resulted in U.S. military equipment losses of $3.7 billion, with nearly 60 aircraft damaged, compounded by the bombing of Saudi Arabia's east-west oil pipeline leading to a shutdown of 7 million barrels per day in capacity, and the Houthi forces seizing a port in Yemen. The conflict is evolving from a simple geopolitical confrontation into substantial damage to global energy supply chain infrastructure, with the consumption of funds and resources rising from "diplomatic game costs" to the scale of "hardware reconstruction costs."
This situation can be compared to the "tanker war" during the Iran-Iraq War in the 1980s—at that time, the conflict also led to a significant shrinkage of shipping through the Strait of Hormuz and severe fluctuations in global oil prices. Historical patterns show that once regional conflicts involving the Strait of Hormuz evolve into direct strikes on energy infrastructure, the spillover time often exceeds initial expectations. The current conflict has replicated the core characteristics of this historical pattern—shipping through the strait is nearing a standstill, and surrounding oil-producing countries' infrastructure is being engulfed in flames, while JPMorgan's initial prediction of the "Strait reopening before June" has failed, indicating that the current conflict is in a deepening phase that is harder to predict than similar historical cases.
Structurally, this is essentially an industry chain reconstruction forcibly triggered by military conflict: the actual closure of the Strait of Hormuz, the shutdown of Saudi oil pipelines, and the change of hands of Yemeni ports are not short-term disturbances but structural damage to the physical channels of Middle Eastern energy exports. Once such infrastructure is repeatedly destroyed and changed hands during the conflict, even if a ceasefire is achieved in the future, restoring the pre-conflict transportation network and capacity levels will require a long reconstruction period. The global energy trade routes may be forced to maintain a new normal of "detours, price increases, and de-Middle Easternization" in the medium term.
ABAB News · Cognitive Laws
- The moment the predictive model collapses is when real risk begins.
- Red lines are not meant to be adhered to; they are meant to be re-priced after being breached.
- War destroys not only territory but also the ability of others to calculate the future.