JPMorgan abandons Iran war baseline as economic thresholds are crossed

JPMorgan abandoned its baseline view of the war in Iran. Natasha Kaneva, the bank's head of global commodities strategy, said the bank could no longer model the endgame. The war began on February 28 and has entered its seventh month. JPMorgan had expected oil above $100, gasoline near $5 a gallon and the 10-year Treasury yield above 5% to pressure President Donald Trump to seek a deal to reopen the Strait of Hormuz. The 10-year Treasury yield crossed 5% this week. Kaneva said US diesel reached a record $6.31 a gallon while inventories were at all-time lows. An interim agreement arrived in June. Fighting resumed within weeks, and escalation has continued since. JPMorgan sees Brent's fair value near $90. Brent's current price is around $105. Kaneva said each 1 million bpd of lost supply could add roughly $4 to futures prices. Current prices imply about 4 million bpd in additional losses beyond the 10 million bpd already disrupted. Oil inventories may cushion the impact of a prolonged disruption. Inventories have fallen 555 million barrels, below JPMorgan's earlier 1.6 billion-barrel estimate. A Brown University tracker puts the extra US fuel burden at $109.1 billion, or $832.48 per household, against a no-war baseline. Gasoline has climbed 48.9% since February. Diesel has climbed 74.3% since February.