US banks warn that the market may be underestimating the risks posed by the war in Iran

Global economists at Bank of America Securities have warned that investors may have underestimated the extent to which the war in Iran could cause global economic turmoil.

Bloomberg reported that Gabriel, a global economist at Bank of America Securities, wrote in a report on Monday (March 16th), "Although the possibility of the conflict being resolved quickly does exist, we believe that the likelihood of the conflict continuing into the second quarter is also very high, and the possibility of a protracted war cannot be ruled out either... However, the market seems to think that this is largely just a temporary shock."

The S&P 500 index has declined by only about 4% from its historical peak. Gabriel believes this indicates that investors are relatively optimistic about this war, despite the inflation concerns that have led traders to lower their expectations for the extent of the Fed's interest rate cuts this year.

He said: "We believe that the market mainly focuses on inflation, while the more disruptive scenarios for global growth may have been underestimated."

As the direction of the war remains uncertain, Wall Street is scrambling to assess how this conflict will ultimately affect the stock market.

Currently, strategists at Goldman Sachs and Morgan Stanley remain optimistic about the US stock market. They point out that the fact that earnings growth and valuation levels have not been overly inflated will provide support for the stock market. However, Parker, the co-head of global investment strategy at JPMorgan Private Bank, said that the market's attitude towards this war is "slightly complacent".