JPMorgan’s trading arm stated that U.S. stock traders are unprepared for a potential pullback in the S&P 500 due to the impact of the Iran war, and the index could fall as much as 10% from its peak.

Andrew Taylor, JPMorgan’s global head of market intelligence, said on Monday that he holds a “tactically bearish” view on U.S. stocks due to the lack of signs of de-escalation in the Middle East conflict and oil prices breaking through $100 a barrel. A pullback would see the benchmark U.S. stock index fall 10% from its peak, meaning the S&P 500 would drop to around 6270 points, a decline of about 7% from Friday’s closing price.

Taylor wrote that investors are not prepared for a decline, and “positioning is currently neutral, with no extreme deleveraging.” He stated that energy stocks were net sold off last week as traders “expected a de-escalation.”

Conversely, oil prices surged above $100 a barrel over the weekend as several Gulf states cut oil production, raising concerns about continued supply shocks and stagflation risks. For Taylor, these risks may quickly subside if the conflict does not continue.

He wrote, “If the conflict can be completely resolved, then this tactical appeal will cease, as macroeconomic fundamentals still support risk assets.”

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