‘Investors Are Underestimating War Risks,’ Says Bank of America

FomoAnxiety · 2026-03-16T21:41:43+00:00

Investors may underestimate the long-term economic disruptions from the Iran war, despite current market stability. While optimism about stocks persists, concerns remain that inflation and prolonged conflict could significantly impact global growth and oil prices.

FomoAnxiety

2026-03-16 21:41:43

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Investors may be underestimating how much the war with Iran could disrupt the global economy, according to Bank of America BAC +0.68% ▲ global economist Antonio Gabriel. While a quick resolution remains possible, Gabriel believes that it is just as likely that the conflict could continue into the second quarter, and an even longer war cannot be ruled out. Despite this uncertainty, financial markets appear to be treating the situation as a temporary shock rather than a lasting economic threat.

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So far, market reactions support that view, as the S&P 500 SPY +0.95% ▲ has fallen only about 4% from its record high. At the same time, inflation concerns have already led traders to scale back expectations for Federal Reserve rate cuts this year, while dip-buyers stepped in on Monday to push the index higher as oil (CM:CL) prices declined. According to Gabriel, this suggests markets are focusing mainly on inflation risks while potentially underestimating the impact the war could have on global growth.

Nevertheless, strategists at Goldman Sachs GS +1.29% ▲ and Morgan Stanley MS +0.26% ▲ remain optimistic about stocks, pointing to earnings growth and more reasonable valuations. However, JPMorgan Private Bank JPM +0.60% ▲ strategist Stephen Parker warned that markets appear “a bit complacent.” Meanwhile, RBC Capital Markets RY +1.76% ▲ strategist Helima Croft said the conflict could last into the spring and noted that oil prices could exceed the 2022 peak of $128 per barrel if the war continues for several weeks. In addition, it could surpass the 2008 record of $146 if it drags on for months.

Is SPY Stock a Good Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust SPY +0.95% ▲ based on 412 Buys, 81 Holds, and 10 Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $830.38 per share implies 24.1% upside potential.

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