The largest bank in the US is lowering its year-end target for the S&P 500, warning that tensions in the Middle East will limit the index’s upside potential.
JPMorgan Chase’s team of strategists, led by Fabio Bassi, says the bank is cutting its 2026 year-end target for the S&P 500 from 7,500 to 7,200, noting that limited oil supplies passing through the Strait of Hormuz could negatively impact U.S. corporate profits and economic growth, Bloomberg reports.
Facts shows that since the outbreak of the conflict, approximately five to six ships per day have passed through the strait, a decrease of more than 95% from the number of 138 ships before the hostilities.
Says Bassie,
“Geopolitical concerns and higher energy prices will push global growth lower and inflation higher for longer. We recommend investors remain invested with downside hedges in equities, and we are holding on to these hedges given this year’s modest correction.”
According to Bassi, the oil price shock is putting pressure on companies’ earnings growth in a market already dealing with fears of AI disruption and private credit stress.
“From an earnings perspective, ~$110 oil through year end implies a 2-5% decline in S&P 500 consensus EPS, with more pressure as crude heads higher. Near-term equity risk has more to do with multiple compression as investors reassess growth and liquidity than a deep earnings recession.”
At the time of writing, the S&P 500 is valued at 6,591, indicating an increase of more than 9% versus the bank’s final target. Meanwhile, the US Crude Spot (WTI) is trading at $95.36 per barrel.
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