JPMorgan CEO Dimon Warns: Rising Oil Prices Could Trigger Recession and Bear Market in the U.S.

JPMorgan Chase CEO says the Iran conflict and AI could raise inflation in the short term, potentially making it this year’s “spoiler.”

Jamie Dimon warns that in 2026 a “downer ‘skunk’” may appear—one that drives inflation higher and leads to a selloff in the stock market.

JPMorgan Chase CEO Dimon previously warned about “cockroaches” in the regional banking system; now he also foresees that in 2026 a “downer ‘skunk’” could emerge, potentially triggering an economic recession and pushing the stock market into a bear market.

Some people may think this “skunk” refers to concerns about private credit, but Dimon doesn’t see it that way. In his annual letter to JPMorgan Chase shareholders on Monday, he said the private credit market lacks transparency and, in the current environment, causes larger losses than it should. However, he added that because the market is relatively small, “it likely won’t pose systemic risk.”

He said he is worried about the Iran conflict and how the Russia-Ukraine war affects energy prices, especially in the short term. He gave examples, noting that the large-scale recessions of 1974 and 1982 are believed to have been triggered by a surge in oil prices.

He also said that while, in the long run, artificial intelligence (AI) should lower inflation, all the spending used to develop AI could push up prices in the short term.

In Dimon’s view, inflation is an uncertainty in the current environment. If inflation stays high, interest rates will rise; he said interest rates act like “gravity” for the prices of almost all assets.

Dimon wrote: “The spoiler ‘skunk’ that could show up in 2026 will be inflation going up instead of down. Just that alone could lead to higher interest rates and lower asset prices.”

He said that while the fragility of the current economy is not as severe as in the past, there is still a “tipping point” that can lead to a recession. He also said that because human nature “hasn’t changed,” when asset prices fall, investor sentiment could shift quickly and prompt money to flee to cash.

JPMorgan Chase’s stock price rose 0.8% in the recent pre-market session. The stock is down 8.8% year to date, but it is up 39.8% over the past 12 months. By comparison, the S&P 500 index is down 3.7% year to date and up 30% over the past 12 months.

Given this, Dimon said the “most important takeaway” for investors right now is that the current wars are resolved properly. Other “favorable factors” for the economy and the market include the funding injected into the economy by the “Big Beautiful Bill” (One Big Beautiful Bill). Dimon also discussed a wide range of other issues, including AI, bank regulation, and even the situation where the bank’s employees move from New York City to Texas.

**　AI is not a speculative bubble**

Dimon compared AI transformation to electricity and the internet, but he said AI adoption will be faster. He believes electricity and the internet took decades to spread, while the deployment of AI applications will accelerate in the coming years.

Dimon wrote: “We’re going to deploy AI the way we deploy all technologies, so that we can serve our clients (and employees) better.”

Although he can’t explain how AI will develop or predict who will come out on top, he is confident that AI will have a “massively positive impact” on productivity. He also believes it will cure certain cancers and ultimately shorten weekly working hours.

Dimon wrote: “Overall, investing in AI is not a speculative bubble—it brings significant benefits. But for now, we can’t predict the final winners and losers in AI-related industries.”

**　Regulation isn’t entirely good or bad**

Dimon emphasized some problems in the current banking regulatory environment. Since the 2008–2009 financial crisis, risk in the financial system has been reduced, but some rules that were hurriedly drafted by regulators in emergency mode have already hindered lending and growth.

He said he would be happy to see proposals to revise regulatory rules for globally systemically important banks (GSIBs), including lowering capital buffer requirements. But he believes there are still some aspects of regulation that are “utter nonsense.”

Dimon said: “Given where we stand in the market, it’s reasonable to accept some level of capital surcharge. But the proposed level seems to be nothing more than punishing our success, our strength, our solid performance, and our balanced business model.”

**　Private credit is relatively small in scale**

Dimon wrote that the total size of the leveraged private credit market is $1.8 billion. By comparison, the U.S. high-yield bond market is $1.5 trillion, and the syndicated leveraged loan market is $1.7 trillion.

By contrast, the total market size of investment-grade bonds is $13 trillion, and the total market value of residential mortgage-backed securities and loans is also $13 trillion.

Dimon wrote: “From the big picture, private credit may not pose systemic risk.”

He said that one surprising thing about the private market is that when the stock market is near historical highs, the S&P 500 index is about 5.5% below its historical closing high as of January 27, yet more companies aren’t taking advantage of the opportunity to list.

Dimon wrote: “The average holding period for private equity is now seven years—almost double that of the past.”

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Responsible editor: Li Tong