JP Morgan sees 10% plunge in S&P 500 over Iran war

Wall Street traders are ill-prepared for an expected sharp 10% plunge in the S&P 500 triggered by the escalating war in Iran, JPMorgan Chase & Co.’s trading desk warned Monday, as oil prices soared past $100 a barrel and risks of economic stagnation loomed.Andrew Tyler, head of global market intelligence at the financial giant, shifted to a “tactically bearish” stance on US stocks as the conflict entered its second week, with no end in sight.Such a correction from the index’s peak would drag the S&P down to about 6,270 — a 7% slide from Friday’s close — as Middle East turmoil disrupts global energy supplies.Traders have shown “a lack of extreme de-risking with positioning currently neutral,” Tyler noted in a client update, adding that energy stocks faced net selling last week on bets for quick de-escalation.Iran’s oil exports would stall and output halve if the US and Israel were to seize its port on Kharg Island, triggering further attacks from ​Tehran on regional oil infrastructure, JP Morgan said in the note.“A direct strike ​would immediately halt the bulk of Iran’s crude exports, likely triggering severe ​retaliation in the Strait of Hormuz or against regional energy infrastructure,” ⁠the Jamie Dimon-led lender added.Several Gulf nations slashed oil output over the weekend, fueling supply fears and pushing crude prices into triple digits.But JPMorgan’s Tyler said he sees potential for a quick rebound if tensions ease.“A definitive off-ramp to the conflict will end this tactical call as the underlying macro fundamentals remain supportive of risk-assets,” he wrote.The alert comes as markets grapple with the war’s fallout, which began last week with Iran’s blockade of the Strait of Hormuz — a chokepoint for 20% of global oil flows.

Brent crude surged 5% Monday to $102.50, while West Texas Intermediate hit $98.75, stoking inflation worries that could force the Federal Reserve to hold off on rate cuts.US sto...