JPMorgan warns: Soaring oil prices will have a destructive impact on the economy, lowering the S&P 500 index target to 7,200 points.

格隆汇 March 19｜JPMorgan strategists stated that four out of the five oil shocks since the 1970s ultimately led to economic recessions. The market is currently mainly focused on the inflationary impact brought by rising oil prices, but the truly more significant risk lies in the possibility that a prolonged closure of the Strait of Hormuz could cause oil prices to soar, which would eventually damage the economy by suppressing demand. The team led by Dubravko Lakos-Bujas pointed out that although some bubbles in high-risk factors and speculative sectors have already been squeezed out of the market, investor complacency is still evident. When crude oil prices rise by about 30%, the correlation between the S&P 500 Index and oil prices usually becomes increasingly negative. Brent crude oil further rose by 10% on Thursday, with a cumulative increase of over 60% since the start of the conflict. Meanwhile, the S&P 500 Index has moderately declined by 3.7% since the outbreak of the conflict. JPMorgan estimates that every sustained 10% rise in oil prices may reduce the growth rate of US GDP by 15 to 20 basis points. If oil prices remain at the current level of about $110 per barrel for the rest of this year, the earnings expectations of S&P 500 Index constituent companies may decrease by 2 to 5 percentage points; if oil prices rise further, the pressure on corporate profits will become even more apparent. The strategists have lowered their target for the S&P 500 Index at the end of 2026 from 7,500 points to 7,200 points.