JAMIE DIMON: Iran is not enough of an inflationary party yet

Speaking at the firm’s annual Global Leveraged Finance Conference, Dimon warned that inflation could be “the skunk in the room”. The veteran Wall Street expert said that it is unlikely that these economic spillovers will arise from a conflict in the Middle East alone, although the threat it poses increases the longer military action continues.

Damon shared his thinking with various media outlets, however He explained to Bloomberg“We look at risks, at a wide range of outcomes, and there are negative outcomes. One of them would be inflation, I call it ‘the skunk at the party.’ It has come down, but it looks like it may have stabilized at about 3%. If things go up — and that’s just one thing, you can look at drug prices, construction prices, insurance rates, wages — inflation is a big thing. It’s not just oil, so we’ll say… that’s going to add a little, a little bit to inflation.”

Military action in the Middle East may be inflationary Due to the interruption of trade routes. Iran lies along the Persian Gulf and the Gulf of Oman, and in particular, the narrower stretch of the Strait of Hormuz that connects the two. Oil from Kuwait, Qatar, Saudi Arabia and the United Arab Emirates needs to pass through the Strait of Hormuz to be exported around the world – about 20 million barrels per day according to estimates. Figures from 2024.

If oil can pass through the strait, there is another problem: In the wake of the strikes on Iran, the Houthi army based in Yemen has threatened attacks on ships passing through the Red Sea. sea. The Red Sea is a vital trade route between East and West, located between the continents of Africa and Asia. It passes through the Suez Canal, which leads to the Mediterranean, meaning that if ships cannot pass through the Red Sea in the south, where it borders Yemen, boats will instead have to divert around the African continent.

talking to CNBCDimon repeated his skunk theory, but expanded his thinking on how to prove inflation in Iran alone. The 69-year-old added that in an “isolated” scenario, Iran would not materially increase inflation risks, but added: “This will now raise gas prices a little bit… If it doesn’t last too long, it won’t be a big inflationary hit. If it lasts for a long time, it will be a different story.”

Fed headache

Speculators were already on the fence about whether the Fed would deliver another rate cut at its meeting this month. The latest jobs report came back stronger than expected, and President Trump is continuing his tariff agenda at pace — despite the setback he suffered from a recent Supreme Court ruling.

Moreover, wrote the economist RSM Mr. Nguyen On Friday, “data on producer prices is not a good sign regarding inflation.” The producer price index rose 0.5% in January, The Bureau of Labor Statistics reported last week – marking an upward trend since October.

Even before the weekend update, Nguyen wrote: “This is not a recipe for short-term rate cuts, barring an unexpected shock. In our view, July is likely to be the earliest date for reconsidering the terms of a rate cut. Between now and July, we see more tailwinds for spending than headwinds, and as a result, there are more reasons for inflation to rise than to fall.”

Iran may have been the final nail in Iran’s coffin. At the time of writing, FedWatch from CME There is a 97% chance the meeting will take place within two weeks.