JPMorgan cuts its US stock outlook and warns markets are being too complacent about an oil shock

• JPMorgan lowered its S&P 500 price target, warning that markets are happy with the Iran conflict.

• Even as oil prices have continued to rise since the start of the war, stocks have remained remarkably resilient.

• Historically, stocks have become much more sensitive to increases in oil prices after a 30% rally.

JPMorgan reduced its 2026 year-end S&P 500 target from 7,500 to 7,200, warning that investors were complacent with the expectation that the increases in oil prices would be short-lived.

The US stock market remains resilient despite rising oil prices since the start of the Iran war nearly three weeks ago. JPMorgan said this relative calm was based on a single “high risk assumption” by investors, which led to complacency about the war.

“We believe the market is pricing in a quick end to the Middle East conflict and reopening of the Bosphorus, making a potential demand hit unlikely,” JPMorgan said. “This is a high-risk assumption given that S&P 500 and Oil correlations have become increasingly negative after a ~30% rally in oil.”

Oil prices have risen more than 46 percent since the U.S. and Israel first attacked Iran, but the S&P 500 has lost less than 4 percent. Analysts stated that investors try to protect from risk rather than avoiding it, and explained that the high-risk and speculative areas of the market are as follows: software, South Korea stocksAnd crypto, sold, some foam is gone, but the comfort remains.

“Market attention has largely focused on the inflationary impact from higher oil prices, but the larger and more important question in our view is the potential negative transmission mechanism to demand if the Strait is not reopened,” analysts said. he wrote.

Bank of America expressed a similar concern, warning that investors’ focus on the inflationary impact of the war was overshadowing the risk of a more serious global inflation. synchronized global slowdown caused by a longer war.

Citadel Securities made a similar call this week, stating that it sees: risk change from inflation to growth

JPMorgan has warned that an oil supply deficit will hurt global GDP, slowing income growth and also increasing the risk of recession. They noted that four out of five oil shocks since the 1970s have led to recession; This is “not at all surprising” because supply shocks often lead to a collapse in demand.

The oil shock caused by the war in Iran came at a time when the market was already challenging. JPMorgan listed private credit concernsto contain software specific concerns and a increase in retail sales, Artificial intelligence trading is losing its powerONE affordability crisisa cooling labor marketAnd The Federal Reserve’s job is tough as the balancing act, challenges to managing the economy.

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