- Wall Street firms like JPMorgan are warning of a potential 10% S&P 500 correction due to Middle East tensions disrupting oil markets.
- Strategist Ed Yardeni raises the probability of a 2024 market meltdown to 35%, citing a trapped Fed and rising oil price risks.
- JPMorgan analysts warn that attacks on oil infrastructure could push crude toward $120 a barrel, creating exponential supply problems.
Top Wall Street firms are sounding alarms this week, warning that escalating Middle East tensions threaten to derail the US stock market’s multi-year rally. Veteran strategist Ed Yardeni states we are in “fast-moving times” as the conflict hurts global markets and crucial sectors.
Consequently, Yardeni has raised his probability assessment for a market meltdown this year from 20% to 35%. “The US economy and stock market are stuck between Iran and a hard place currently. So is the Fed,” he wrote, noting the central bank’s inflation and employment mandates are at risk.
Meanwhile, JPMorgan‘s $4.8 trillion asset manager warns the S&P 500 could be headed for a 10% decline. Their analysts say a prolonged war could send the benchmark to 4,720, with options pricing implying another 2.9% drop this week alone.
Furthermore, the bank’s trading desk has turned tactically bearish, noting investors are not positioned for further risk. “The precedent of oil infrastructure under attack has officially begun, and we believe the products rally seen last week is just starting,” their commodities desk said.
They added that each day of blockage through the Strait of Hormuz creates larger problems, with regional declines rapidly approaching levels consistent with $120 oil. However, US stocks slowed their heavy losses on Monday as crude prices eased slightly amid the conflict.
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