By Julien Ponthus and Michael Msika

(Bloomberg) -- Complacent investors who assume there will be a swift resolution to the Iran war are making a high-risk bet given how bad surging oil prices typically end up being for stocks, according to strategists at JPMorgan Chase & Co.

The team, led by Dubravko Lakos-Bujas, said investors are failing to price the potential economic damage from soaring energy costs, despite the fact that four out of five oil shocks since the 1970s have led to recession.

Most Read from Bloomberg

• Trump Signs Order to Launch Vance-Led Anti-Fraud Task Force

• Russian Oil Bound for China Is Diverted as India Grabs More

• US Carrier Involved in Iran Fight Heads Back to Port After Fire

“While some of the froth has been taken out of high-risk factors and speculative areas of the market, we still see complacency,” the strategists said in a note. They added that correlation between the S&P 500 index and oil typically turns “increasingly negative” when crude prices spike by about 30%.

The market has focused on the inflationary effect of higher oil prices, but the most consequential impact in fact lies in the economic strain caused by a prolonged shut down of the Strait of Hormuz, they added. At the heart of this concern is the destruction of demand triggered by soaring oil prices.

Brent crude surged a further 10% on Thursday, stretching its advance since the start of the war to more than 60%, after Iranian missile strikes caused damage to the world’s largest liquefied natural gas export plant in Qatar. The S&P 500 has dropped by a modest 3.7% since the conflict erupted.

JPMorgan estimates that each sustained 10% increase in oil prices could shave 15 to 20 basis points off GDP growth. If oil prices hold for the rest of the year at current levels around $110 a barrel, earnings estimates for S&P 500 companies could drop by 2-5 percentage points.

The pressure on profits would become even more pronounced if oil prices move higher, they added. The strategists cut their 2026 year-end target for the benchmark S&P 500 to 7,200 points from 7,500.

Most Read from Bloomberg Businessweek

• American Retirees Want to Leave the Country. Italy and Costa Rica Are Happy to Have Them

• We Kinda Messed Up Our Retirement

• People Are Using Claude to Do Their Taxes (But Maybe They Shouldn’t)

• The Rise and Fall of Peter Attia’s Longevity Empire