The strategy team lowered its year-end S&P 500 target to 7,200 from 7,500, highlighting the de facto closure of the Strait of Hormuz as a pivotal event that could stifle growth. Fabio Bassi and colleagues noted this revision follows the SPDR S&P 500 ETF’s longest losing streak in over a year. Although the new target still implies an 11% gain, strategists warn markets have yet to fully price in deeper economic contraction risks.

Analysts point to sustained triple-digit crude prices as a central threat to earnings and valuation. With oil trading around $110 per barrel, JPMorgan forecasts a 2% to 5% cut to S&P 500 consensus EPS if high energy costs persist through year-end. They warn that this supply shock creates multiple compression pressures as investors reassess growth and liquidity. Historical precedents show that four of five major oil shocks since the 1970s triggered recessions, underscoring the risks.

To manage these risks, the strategy team recommends robust downside hedges while maintaining equity exposure. The firm notes that private-credit writedowns and technological disruption add to headwinds beyond the energy tax on consumers and industry. Central bank interventions remain uncertain, with stagflationary pressures narrowing the path to a soft landing. Investors are urged to prepare for elevated volatility driven by geopolitical and inflationary challenges.