Oil prices spiked hard on Iran conflict fears. JPMorgan thinks the hangover from that shock is about to become a tailwind for stocks.
The bank’s commodities team, led by Natasha Kaneva, alongside equity strategist Dubravko Lakos-Bujas, has laid out a thesis that connects the dots between falling crude prices and the next leg up in equities. The logic is straightforward: cheaper oil means lower inflation, which means central banks have more room to maneuver, which means risk assets get a friendlier environment.
The oil picture: from spike to slide
Tensions around the Strait of Hormuz pushed crude prices sharply higher. Oil spiked between 10% and 16%, pushing toward or above $100 per barrel as markets priced in the possibility of supply disruptions from the Iran conflict.
Four out of five major oil shocks since the 1970s have led to recessions.
