J.P. Morgan lowers SandP 500 target Strait of Hormuz could disrupt the economy

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•  21 Mar 2026
 

The bank lowered its end-of-2026 target to 7,200 points from 7,500, amid concerns about disruptions to oil flows and their impact on corporate profitability. The index has already lost 5.4% from its February peak.

J.P. Morgan lowered its target price forecast for the S&P 500 index to 7,200 points by the end of 2026, down from 7,500 points in the previous forecast. The update reflects a reassessment of geopolitical risks, particularly concerns about a possible disruption in oil flows through the Strait of Hormuz, through which about 20% of global oil trade passes. A partial or prolonged blockage of the strait could lead to sustained increases in energy prices and affect the entire production and consumption chain.

The index closed last Friday at 6,506 points, down 1.5% for the trading day and marking a fourth consecutive week of declines — the longest losing streak in more than a year. Since its peak on February 27, the index has fallen by 5.4%. Despite the correction, the new forecast still points to an upside potential of about 11% from the current level. The bank also recommends maintaining downside protection, including put options and other hedging instruments.

The reduction in the forecast stems from an assessment of the impact on corporate earnings and market valuation multiples. An oil price of $110 per barrel by the end of the year could reduce earnings per share (EPS) of companies in the index by 2%–5%. Higher fuel costs negatively affect supply chains, transportation, and manufacturing. Industrial companies that raise prices may experience a decline in demand, while retailers could face margin compression. The aviation and logistics sectors are particularly sensitive, while energy companies benefit from rising prices.

The main risk is not only a hit to earnings but also pressure on price-to-earnings (P/E) multiples, as investors reassess growth potential and market liquidity. Historically, major oil shocks such as those in the 1970s led to recessions, as high energy prices filtered into private consumption and slowed economic activity. Even without a full recession, the market is now pricing in a higher risk premium.

Beyond the geopolitical risk, the market is facing additional challenges. Uncertainty surrounding investments in artificial intelligence is disrupting budgets in traditional industries. At the same time, risks in the private credit market are increasing, with liquidity issues and valuation adjustments raising concerns among investors.

J.P. Morgan recommends remaining invested in the market for the long term while maintaining hedges to cope with volatility. If the Strait of Hormuz remains open and oil prices ease below $90 per barrel, the index could recover and even rise beyond the updated forecast, according to the bank’s analysts. A prolonged disruption, on the other hand, would increase pressure on the economy and hurt growth potential. The market is already showing warning signs with continued declines and high volatility, and investors, according to the analysts, should focus on risk management rather than chasing quick profits.

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