JPMorgan Chase CEO warns of persistent inflation and higher interest rates amid US-Iran tensions

JPMorgan Chase CEO Jamie Dimon warned in the bank’s annual letter to shareholders that the ongoing US–Iran conflict could trigger shocks to oil and commodity prices, making inflation more persistent and pushing interest rates higher than markets currently forecast.

Dimon’s warning follows President Donald Trump’s weekend “ultimatum” to Iran, saying the United States would attack Iran’s critical infrastructure if Tehran does not reopen the Hormuz Strait by 8 p.m. Tuesday, U.S. time. Dimon said the war between the U.S. and Iran has added to broader global challenges, including the conflict in Ukraine, tensions in the Middle East, and a strained U.S.–China relationship.

Geopolitical risk and inflation outlook

In the letter, Dimon wrote that the conflict could cause sustained price shocks in oil and commodities, disrupt global supply chains, drive inflation higher, and push interest rates above expectations. He also raised concerns about whether the U.S. will achieve its objectives in the Iran conflict, and noted that nuclear weapons remain the greatest threat from Iran.

He linked the inflation risk from the war to market pricing that has reduced expectations for Federal Reserve rate cuts this year. Before the war, markets had expected two rate cuts in 2026.

Market impact and rates

Dimon said the combination of “higher-for-longer” inflation and interest rates has weighed on equities. He noted that the S&P 500 ended Q1 2026 with its worst quarterly decline since 2022.

US economy: resilience, but supported by deficits and stimulus

Dimon said the U.S. economy remains resilient, supported by continued consumer income and spending and healthy business activity. However, he acknowledged that the economy has been sustained by large federal deficits and prior stimulus, and that demand for infrastructure spending continues to rise.

He cited positive drivers including stimulus from the large “beautiful” tax-cut law and deregulation under the Trump administration, along with massive investments in artificial intelligence.

Private credit: not systemic, but losses could rise

Dimon also discussed the U.S. private credit market, which he valued at about $1.8 trillion. He argued that recent problems in private credit are not a systemic risk, but warned that as the credit cycle weakens, losses from leveraged lending could be higher than expected due to looser underwriting standards across the market.

He added that private credit can lack transparency or strict pricing, which can increase the risk of forced selling if conditions deteriorate.

Example: Blue Owl and investor deleveraging

Dimon pointed to Blue Owl, which told investors it would limit withdrawals from two funds after record redemptions in Q1. He attributed part of the pressure to investor deleveraging from AI-focused funds, which he said is driving significant outflows.

Oil shock and potential rate mispricing

Dimon concluded by noting that where the oil price shock exists, markets may be mispricing the prospects for interest rates.