Jamie Dimon warns that the Iran war could bring an economic ‘skunk’ to the party

By David Goldman, CNN

(CNN) — Jamie Dimon is warning that the US-Israeli war with Iran could lead to another round of persistent inflation and higher interest rates that could sink the US economy into a recession and redefine the global economic order.

“Then again, it may not,” Dimon hedged.

In his annual letter to shareholders, released Monday, the JPMorgan CEO painted a mostly rosy picture of the US economy going into 2026. The economy started the year with the wind at its back: Tax cuts and a deregulatory, pro-business agenda from President Donald Trump and congressional Republicans’ One Big Beautiful Bill will add $300 billion to the US economy this year, boosting America’s gross domestic product by about 1%, he predicted. And massive spending on AI and related technologies will drive US productivity.

Dimon said the US economy is on sturdier ground now than in years past, which could insulate America from some of the economic trouble brewing around the world, first and foremost from the war. But that doesn’t negate the possibility of a recession.

“While the economy may be less fragile than in the past, this alone does not mean there is no ‘tipping point’ — it just may mean it could take more straws on the camel’s back to get there,” Dimon said in the 48-page letter.

The war with Iran increases the risk for significant and persistent oil and commodity price shocks, Dimon warned. It could also alter the global supply chain, similar to what happened in the wake of the pandemic. And just like in 2021 through 2023, we could be in for another round of sticky inflation and surging interest rates from the Federal Reserve and other global central banks to counter it.

Dimon called gradually rising inflation and interest rates “the skunk at the party” that could cause stocks to fall this year.

Dimon also warned that though the economy remains strong, it relies on growth and stock market gains to keep fueling it. If those turn south, some of those risks present in the economy could become a problem.

For example, enormously high government debt loads are manageable as long as GDP remains robust and interest rates stay relatively low. But that’s a big “if,” and the debt could balloon into a crisis down the road if it’s not properly managed, Dimon warned.

Stock prices are high in part because of global turmoil. US equities remain a safe haven asset, but Dimon noted that didn’t prevent previous recessions and bear markets. Sometimes bad markets spook investors, creating a kind of feedback loop.

“Human nature has not changed — sentiment and confidence can change rapidly and drive the markets,” Dimon said. “Falling asset prices at one point can change sentiment rapidly and cause a flight to cash.”

Dimon also warned about souring US-China relations, Trump’s trade policy and growing problems in the private credit market.

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