"Warning: Global Stock Markets at Risk of Collapse... JP Morgan Says S&P 500 Could Drop by Up to 15%"

As the United States and Iran escalate their offensives, international oil prices are experiencing significant volatility, raising concerns that global stock markets could face a chain reaction of shocks. There are even predictions that the S&P 500 Index, the benchmark U.S. stock index, could fall by as much as 15%.

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According to U.S. financial media outlet Business Insider (BI) on March 15 (local time), JP Morgan warned in a note sent to clients on March 13 that if oil prices remain above $90 per barrel for an extended period, the S&P 500 Index could decline by 10-15%. The firm also projected that should oil prices approach or exceed $120 per barrel in the future, selling pressure on the S&P 500 would further intensify. Last week, the S&P 500 Index closed at 6,632.19.

Strategist Kriti Gupta and Chief Economist Joe Seydl cautioned against a so-called “domino effect,” where rising oil prices drag down stock prices, reduce household assets, lower consumption, and ultimately slow national economic growth. According to the U.S. Federal Reserve, as of the third quarter of last year, U.S. households held approximately $56.4 trillion (about 8,454.4 trillion won) in stocks and mutual funds. JP Morgan estimated that if the S&P 500 Index falls by 10%, U.S. consumer spending could decrease by about 1%.

Soaring oil prices are already having a direct impact on Americans. According to the American Automobile Association (AAA), as of March 13, the average gasoline price in the U.S. stood at $3.63 per gallon, marking a surge of about 21% since the war between the United States and Iran began on February 28. This is expected to further increase inflationary pressure in the future. Market participants are concerned that rising oil prices could both fuel inflation and slow economic growth at the same time.

Similar concerns have been raised in Japan. The Nikkei reported that if high oil prices persist, there is a scenario in which the Nikkei 225 Index could fall below 50,000 yen. Nomura Securities estimated that a 10% increase in oil prices could lower the earnings per share (EPS) of major companies by about 1-1.25%. If oil prices, which were around $65 per barrel last month, rise to about $90 (an increase of 38.5%), this would, by simple calculation, put downward pressure of more than 4% on EPS. This is ultimately expected to translate into downward pressure on the price-earnings ratio (PER).

Due to heightened instability in the Middle East, oil price volatility is expected to remain elevated for the time being. According to Investing.com, a real-time global financial information provider, as of 9:52 a.m. on March 16 (Korea time), Brent crude for May delivery was trading at $102.89, down 0.24% from the previous session. Amid the ongoing confrontation between the U.S. and Iran, the price briefly soared to $106.50 during the morning session. West Texas Intermediate (WTI) crude also surged to $99.71 during the day before settling at $95.98, down 0.89% from the previous session.

Michael Waltz, U.S. Ambassador to the United Nations, said in an interview with CNN on March 15 that President Donald Trump has not ruled out the possibility of striking oil infrastructure on Kharg Island, a key export hub for Iranian oil. Kharg Island processes about 90% of Iran's oil exports. President Trump has so far only destroyed military installations on Kharg Island, leaving the oil infrastructure intact. Previously, President Trump stated, "If Iran does not interfere with navigation in the Strait of Hormuz, I will immediately reconsider the decision to attack oil infrastructure."

Market observers believe that if the U.S. attacks or seizes the energy facilities on Kharg Island, oil prices could surge again due to concerns about disruptions to crude oil supply. Giovanni Staunovo, an analyst at Swiss bank UBS, said, "With oil flows through the Strait of Hormuz still restricted, the direction for oil prices is clearly upward."

The International Energy Agency (IEA) announced that emergency oil reserves in Asia would be released immediately, but there are projections that this will not be enough to stabilize oil prices. The IEA said that Asian and Oceania member countries would begin releasing their reserves from March 16. Member countries in the Americas and Europe will also start releasing reserves at the end of March. A total of 411.9 million barrels will be released.

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