'We simply don't know' - JP Morgan struggling to forecast oil prices due to Trump's war with Iran
JP Morgan has conceded it cannot reliably forecast oil prices as the unpredictable US-Iran confrontation under President Donald Trump deepens. For UK investors, that uncertainty adds volatility to energy stocks and sterling, while raising the risk of inflation surprises that could reshape Bank of England rate expectations.
The bank’s acknowledgment that it ‘simply doesn’t know’ where crude will head next reflects a market where conventional modelling tools have broken down. US-Iran military escalation—ranging from threats to shipping lanes in the Strait of Hormuz to direct retaliation—has made supply-risk the dominant, but unquantifiable, variable. Traders are left reacting to headlines rather than fundamentals, a pattern that historically amplifies intraday swings.
For the UK, oil price jolts feed directly into inflation via fuel and transport costs. If Brent crude sustains above $90 a barrel, the Bank of England may need to keep rates higher for longer, delaying any cut that the economy and gilt market are pricing for mid-2025. A stronger dollar, often accompanying geopolitical crises, could also pressure the pound, complicating the BoE’s job. Across the Atlantic, the Federal Reserve faces a similar dilemma, as higher energy costs could stall its own rate-easing cycle, affecting global capital flows.
On the London Stock Exchange, integrated oil majors such as Shell and BP benefit from higher realised prices, but the added volatility makes their earnings streams less predictable for investors. Meanwhile, discretionary sectors—airlines, retail, hospitality—suffer margin compression from rising input costs. The FTSE 100’s heavy weighting in energy and mining means the index may stay volatile, but UK-focused mid-caps could take a larger hit from domestic demand weakness.
What to watch: The key triggers are whether the US launches strikes on Iranian nuclear facilities or Iran retaliates against Gulf oil infrastructure; also, any OPEC+ emergency meeting to adjust output. Markets will parse every statement from Tehran and Washington. Until the fog lifts, JP Morgan’s caution is a signal to treat any oil price forecast—and any asset dependent on it—with extra scepticism.
Frequently asked questions
How does oil price uncertainty affect UK inflation and Bank of England policy?
Higher oil prices boost inflation through fuel and transport costs; if persistent, the BoE may delay rate cuts to avoid reigniting price pressures, keeping borrowing costs higher for longer.
Should I reduce exposure to UK energy stocks amid this volatility?
Energy majors can benefit from high prices, but unpredictability raises risk. Diversify with a mix of defensive sectors like utilities or healthcare to hedge against sharp oil swings.
What geopolitical events should I monitor for oil price direction?
Watch for direct US-Iran military strikes, Iranian retaliation against Gulf shipping or Saudi infrastructure, and any emergency OPEC+ decision to raise or cut supply.
Reporting contributed by BBC Business — BBC Business · Título original: "'We simply don't know' - JP Morgan struggling to forecast oil prices due to Trump's war with Iran"
