US stocks plunge as JPMorgan cuts S&P 500 target on Iran war
Geopolitical tensions and oil shock drive risk-off sentiment with Treasuries testing 12-month highs
US stocks tumbled on Friday as JPMorgan strategists slashed their year-end target for the S&P 500, warning that investors are underestimating the economic fallout from the escalating Iran war. The benchmark index fell 1.5% to 6,506.48, extending its losing streak to three consecutive days and marking its fourth straight week of declines.
The Dow Jones Industrial Average dropped 1% to 45,577.47, its lowest close of 2026, while the technology-heavy Nasdaq Composite slid 2% to 21,647.61. The broad-based selloff reflected mounting concern across all major sectors as risk-off sentiment gripped markets.
JPMorgan's equity strategists, led by Dubravko Lakos-Bujas, cut their S&P 500 year-end target from 7,500 to 7,200, citing prolonged geopolitical uncertainty and the threat of sustained oil price shocks. The firm noted that oil price spikes exceeding 30% have historically led to demand destruction and often preceded recessions.
The conflict, which began on February 28 with joint U.S.-Israeli strikes against Iran, has intensified with Iran launching hundreds of missiles and thousands of drones across the region. The Strait of Hormuz—a critical waterway through which roughly one-fifth of global oil supply passes—remains effectively closed, driving crude prices sharply higher. Brent crude fluctuated between $106.56 and $110.12 per barrel, while West Texas Intermediate traded from $93.61 to $98.32.
"The market may be underestimating the duration of the Middle East conflict and its economic fallout," JPMorgan strategists warned in their note. "If oil prices remain elevated, the burden on the economy and corporate earnings could be more substantial than currently anticipated."
Rising bond yields compounded investor anxiety. The yield on the 10-year U.S. Treasury note climbed to 4.39%, its highest level in over a year, while the 2-year note yield rose to 3.88%, according to market data from Morningstar. Higher yields increase borrowing costs for companies and make equities relatively less attractive compared to fixed income.
Sector performance reflected the broad-based nature of the risk aversion. Technology stocks, which are particularly sensitive to interest rate changes, led declines, while consumer companies faced pressure from rising fuel costs. Financials retreated as investors weighed the potential for an oil shock to reverberate through global markets, and utilities slid as surging Treasury yields made dividend-paying stocks less appealing.
President Trump stated there would be "no cease-fire with Iran," according to the Wall Street Journal, with U.S. officials saying they are "very close" to meeting objectives. However, Iran has set preconditions for any ceasefire that remain "worlds apart" from U.S. objectives, suggesting the conflict could persist.
The humanitarian toll has reached more than 2,000 deaths across Iran, Lebanon, and Israel, with hundreds of thousands displaced. The World Food Programme has warned of potential global food security shocks, adding another layer of economic uncertainty.
Investors now face a complex calculation of how long energy prices will stay elevated and whether the Federal Reserve will need to maintain higher interest rates for longer to combat inflationary pressures from the oil shock. JPMorgan's target cut suggests that until there is greater clarity on both fronts, equity markets may face continued headwinds.