Why JPMorgan has given up predicting what the oil markets will do next

The conflict in Iran has not only driven up the price of oil – it has also made it next to impossible for Wall Street firms to forecast future crude costs, On The Money has learned.The commodities team at JPMorgan, one of the biggest players in the global oil markets, is telling clients it can no longer reliably model where crude prices go from here, according to reporting by Fox Business’s Teuta Dedvukaj.With the White House’s on-again, off-again Iran negotiations dragging into their seventh month, JPMorgan’s commodities team has abandoned its “baseline view” on oil prices, the benchmark targets that weigh various factors that influence oil markets.“For the first time since the start of the Iran conflict, we don’t have a baseline view.We simply don’t know how to model the endgame,” JPMorgan commodities strategists told clients last Thursday in a conference call with a large institutional investor, according to a person at the confab.The comments underscore just how tricky the conflict has become for investors trying to play the oil price swings, businesses seeking to hedge oil expenses and, of course, consumers getting squeezed by higher gas prices. President Trump recently indicated he would be open to meet the president of Iran to end the hostilities – good news for consumers even if it underscores the problems with gauging future movements since such seemingly positive developments have sputtered repeatedly in the past. “We assumed there were economic red lines the US administration would be unwilling to cross,” JPMorgan strategists wrote in a note to clients.

“Six months later, many of those lines have been crossed, yet the exit strategy is less clear, not more.”A JPM executive who is authorized to speak to the press tells On The Money: “We continue to publish estimates, but the research team wanted to acknowledge that the end game has become hard to model given the ongoing volatility and a wide range of potential outcomes.”...