JPMorgan Warns of 10% S&P 500 Drop as Iran War Pushes Oil Past $100

TLDR

• JPMorgan’s head of global market intelligence turned “tactically bearish” on U.S. stocks on Monday
• A 10% correction from the S&P 500’s peak would bring the index to around 6,270 points
• Oil has crossed $100 a barrel as Iran war tensions escalate and oil infrastructure comes under attack
• Morgan Stanley disagrees, saying markets are near the end of a “rolling correction” that started in October
• JPMorgan’s commodities desk warned the recent rally in oil products is “just starting”

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JPMorgan Chase is warning that the S&P 500 could fall 10% from its peak as tensions from the Iran war push oil prices above $100 a barrel.

Andrew Tyler, JPMorgan’s head of global market intelligence, turned “tactically bearish” on U.S. stocks on Monday. He cited the ongoing Middle East conflict as the main reason.

A 10% drop from the index’s peak would bring the S&P 500 to around 6,270 points. That is about 7% below where it closed on Friday.

S&P 500 INDEX (^SPX)

JPMorgan’s commodities trading desk said oil infrastructure has been hit on both sides of the conflict. The team said this sets a new precedent and warned the recent rise in oil product prices is “just starting.”

Oil crossing $100 per barrel is a pressure point for the broader economy. Higher energy costs push up prices across many sectors, which can weigh on corporate earnings.

Where Morgan Stanley Stands

Not everyone on Wall Street shares JPMorgan’s view. Morgan Stanley chief investment officer Mike Wilson said the bank stays bullish on stocks over the next six to twelve months.

Wilson said the market has been in a “rolling correction” since October, with returns staying relatively flat despite strong earnings. He believes that correction is nearly over.

The two banks are reading the same data differently. JPMorgan sees near-term downside risk, while Morgan Stanley sees a market close to finding its footing.

What a 10% Drop Would Mean

A 10% decline in the S&P 500 is classified as a standard market correction. These happen regularly and have occurred in 2018, 2020, and 2022 before markets recovered.

For retirement accounts and mutual funds tied to the index, a drop of this size would reduce account values in the short term. Financial advisors generally recommend staying the course and avoiding panic selling.

JPMorgan’s warning is specifically tied to the Iran war escalation and the oil infrastructure attacks. The bank has not pointed to a single domestic economic trigger.

Oil above $100 puts pressure on consumer spending and corporate costs. Energy companies may benefit from higher prices, while sectors like airlines and manufacturing could face headwinds.

The S&P 500 represents 500 of the largest publicly traded companies in the U.S. It is one of the most widely tracked indexes in the world.

JPMorgan has $4.8 trillion in assets and is one of the largest financial institutions globally. Its market calls are closely watched by institutional and retail investors alike.

As of Monday, the bank’s position on U.S. equities shifted from neutral to tactically bearish, driven by the escalation in the Middle East.

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