The evolving conflict with Iran and investment implications

(DESCRIPTION)

Logo: J.P.Morgan. Text: PLEASE NOTE: This session is closed to the press. The views and strategies described herein may not be suitable for all clients and are subject to investment risks. Certain opinions, estimates, investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. This material should not be regarded as research or as a J.P. Morgan research report. The information contained herein should not be relied upon in isolation for the purpose of making in investment decision. More complete information is available, including product profiles, which discuss risks, benefits, liquidity and other matters of interest. For more information on any of the investment ideas and products illustrated herein, please contact your J.P. Morgan representative. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. This information is provided for informational purposes only. We believe the information contained in this video to be reliable; however we do not represent or warrant its accuracy, reliability or completeness or accept any liability for any loss or damage arising out of the use of any information in this video. The views expressed herein are those of the speakers and may differ from those of other J.P. Morgan employees and are subject to change without notice. Nothing in this video is intended to constitute a representation that any product or strategy is suitable for you. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting legal, tax or other) given by J.P. Morgan and/or its officers or employees to you. You should consult your independent professional advisors concerning accounting legal or tax matters. Contact your J.P. Morgan representative for additional information and guidance concerning your personal investment goals. J.P. Morgan is not responsible for information provided by guest speakers (unaffiliated with J.P. Morgan) or the use by attendees of such information. J.P. Morgan cannot verify the accuracy of guest speaker content, views of statements, and accepts no responsibility for any direct or consequential losses arising from its use. Any discussion of companies/markets by guest speakers should not be interpreted as a recommendation to buy or sell or is an endorsement by J.P. Morgan. INVESTMENT AND INSURANCE PRODUCTS: NOT A DEPOSIT. NOT F.D.I.C. INSURED. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. NO BANK GUARANTEE. MAY LOSE VALUE.

(SPEECH)

This session is closed to the press. Welcome to the JP Morgan webcast. This is intended for informational purposes only. Opinions expressed herein are those of the speakers and may differ from those of other JP Morgan employees and affiliates. Historical information and outlooks are not guarantees of future results.

Any views and strategies described may not be appropriate for all participants and should not be intended as personal, investment, financial, or other advice. As a reminder, investment products are not FDIC insured, do not have bank guarantee, and they may lose value. The webcast may now begin.

[UPBEAT MUSIC]

(DESCRIPTION)

Streams of gold unfold against a black background and form the logo in script, J.P. Morgan.

Brandon Hall, RESEARCH ANALYST, GLOBAL MARKET INSIGHTS STRATEGY, J.P. MORGAN ASSET MANAGEMENT. Hall sits against a grey background.

(SPEECH)

Good morning, everybody. I'm Brandon Hall, research analyst here at JP Morgan Asset Management. Welcome to today's webcast titled "The evolving war with Iran and investment implications." Conflict in the Middle East has continued following the initial US and Israeli strikes on Iran, spreading throughout the region, including the critical Strait of Hormuz and fueling volatility across financial markets. The duration and trajectory of the situation remain uncertain, but a prolonged conflict could have meaningful implications for the global economy and asset allocation.

To discuss the investment implications of this evolving situation, I'm joined by Dr. David Kelly, Chief Global Strategist; Derek Chollet, former Chief of Staff to the US Secretary of Defense and head of the JPMorgan Chase Center for Geopolitics; Andy Dacy, Head of Global transportation; Aga Zmigrodzka, equity research analyst covering energy and infrastructure; and Rob cook, global head of high yield fixed income in our global fixed income currency and commodities group.

Now, after 30 minutes of prepared remarks from our speakers, we will open it up for questions from the audience. So for those of you joining us via webcast, you can send us your question using the box on the left hand side of your screen at any point during this call. That covers all of our housekeeping items. David, why I kick it over to you to get things started?

Great.

(DESCRIPTION)

Dr. David Kelly, CHIEF GLOBAL STRATEGIST, J.P. MORGAN ASSET MANAGEMENT. Kelly sits in a residential setting with a desk next to and behind him and bookcases in the background.

(SPEECH)

Thank you, Brandon, and thank you all for calling in. And in particular, thanks to my colleagues here at JPMorgan Asset Management for joining me on this call. So as you can see, we've got a lot of speakers because it's a complex situation. But we're going to try and be very organized in how we talk about this.

So first of all, I'm going to turn it over to Derek to talk about the geopolitical situation and the military situation. Then we're going to turn it over to Andy Dacy, who's a real expert in transportation and global shipping, to talk about the Strait of Hormuz issue in particular. I'm going to turn it over to Aga to talk about what all this means for global energy prices.

Turn it over to Rob to talk about, well, how are we thinking about this in terms of credit and fixed income and the Federal Reserve? And then I'll try and wrap up in terms of, how do we think about this in the context of where the economy and markets were? And what does this mean for investors?

We're going to try and do all of that in the space of 30 minutes, and then I'm going to turn it back to Brandon. I know, please send in your questions. He's going to sift through them all and try and address some of those questions that you have. But with that being said, I'd love now to turn it over to my colleague, Derek Chollet, to talk a little bit about what all this means from a geopolitical and military perspective. Derek.

Great.

(DESCRIPTION)

Derek Chollet, HEAD OF THE J.P. MORGAN CHASE CENTER FOR GEOPOLITICS. Chollet appears against a grey background with four copies of the J.P. Morgan logo down the right side.

(SPEECH)

Thank you, David. Thanks, colleagues. Thanks, everyone, for joining us here this morning. What I'll try to do at the top here is talk about where I think things are, how this might end, and ways it might end. And then, most importantly as well, what's coming next? So first, where we are, since this started six days ago, we have assessed that the US and Israel would sustain this military campaign for days to weeks and then pivot to a mission accomplished narrative, arguing that by substantially degrading Iran's ability to export instability, to threaten its neighbors, and to oppress its people, it's created the best conditions since 1979 to bring about change inside Iran.

Messaging and events over the last few days have only reinforced our base case. I think we should start by saying that from a military perspective, the US and Israel are achieving incredible military success. In the first 100 hours of this war alone, there were over 2,000 targets struck-- senior leaders, including, most importantly, the Supreme Leader of Iran, who was taken out. They've crippled naval assets, basically sinking the Iranian Navy, and put a big dent in the missile program and the drone program.

Just to put this in context, in the first 24 hours of the operation, just this past weekend, there were nearly double the number in terms of targets hit in the first day than the shock and awe strikes in Iraq we saw 23 years ago in 2003. And every day, Iran gets weaker. So while we continue to assess, and we'll hear more about this from colleagues in terms of the market and energy implications, so we continue to assess that the short term is going to be pretty choppy.

It's going to be very turbulent here for the coming days that the medium to long term outlook in the Middle East, we remain quite bullish about. And that however and whenever this ends, Iran is going to come out of this far weaker and therefore less able to export instability and undermine the regional trend we've been seeing over the last decade or so towards greater integration, greater investment, greater innovation, greater modernization. So that's where we are.

Second, how might this end, which I know on many of your minds. It's important to note that the United States owns the clock. The US will decide when this ends. And it's interesting that in most conflicts, the culminating point comes at the end where the senior leader or leadership is taken out. What we happened-- in this case, that happened at the very beginning. The very first strike took out the senior leader of Iran and many of his closest associates.

So the US has a lot of optionality in what it defines as success and its end. And so by offering a range of rationales for this conflict, by staying vague on whether regime change is actually the goal or not, what the precise US objectives are, Washington does have optionality on when it decides that it has achieved enough, and it can begin to wind things down.

Now, it's important to note it's only Day 6 of this war. We had a 12 Day War in June, right, which culminated with US strikes on the Iranian nuclear program. So we're only, by that measure, halfway through where we were last June. So this could go on for a few more days. But as I said, I do expect that in the coming days and not too many weeks will go by that the US will want to begin to wind this down because at some point-- and I can speak from experience on this. At some point, the military gains will become marginal, and they're going to carry greater risks across the board.

Not so much risk to what's happening inside Iran but risks in the region but also risks to us readiness elsewhere in the world. And so at that point, it's going to come down to what I think of as the 3 Ms-- munitions, markets, and midterms. And I'll touch on those very briefly here. So first, on munitions, in the end it's really about math.

The US, especially combined with Israel, have more munitions than any other country, for sure. But we do not have an infinite number of munitions. And while the US and Israel are crushing Iran's ability to fire missiles and drones and weakening the regime significantly, Iran, as we've seen, is counter striking in a significant way in the hopes that the US and Gulf partners will burn through their defenses and have to sort of sue for peace.

So we need to keep a close eye on whether the US and Israeli stocks dwindle and whether they are burning through those munition stocks at a pretty significant rate. But then also, whether the US and the Israelis can destroy enough of what Iran is firing off to make it harder on Iran to sustain this conflict. Because as this goes on, the US is going to have to pull more munitions from other parts of the world that it will need those munitions, potentially, for example, in the Indo Pacific.

But it's also important to note it's not just US munitions, it's also our Gulf partners. Now, our Gulf partners have quite sophisticated air defenses that they've built up over years in cooperation with the US. They're burning through their missile defense interceptors at quite a significant rate. The UAE has been subject to more than 50% of the attacks from Iran, far more than Israel has. And that's missiles but also mostly drones, and drones are really the big problem here.

So watch munitions. The second M-- markets. We're going to talk more about this with our colleagues on the call. We're seeing significant short term disruption across the board. But as I think you'll hear, there's a sense that if this just lasts a few days, folks can manage it. If it stretches into weeks, particularly if it goes into many weeks, you're going to see a real market impact. And if this drags on, that's going to suppress Washington's appetite to keep this going.

And then finally, that feeds into the midterms, which is really about the politics. The politics of the United States in terms of support for this conflict thus far is pretty tenuous. Congress-- the Senate yesterday and the House today-- are having votes on whether the president has the authority to even conduct this campaign. They prevailed yesterday in the Senate. I believe they'll prevail today in the House.

But part of the challenge I think the US administration will face is that as this goes on and as the costs of the conflict rise-- so, for example, if there's continued attacks against Gulf partners, if we start to see real market impact, if energy prices are going up, that is-- the argument that the administration kind of got itself into this mess without a plan, that argument's really going to start to bite. And then the calculus on how all of this impacts the November midterm elections is only going to intensify.

So finally, then, what comes next? So when the decision is taken to end the conflict or significantly downshift the military campaign, what's next? That's a conversation that's much longer than the time we've got allotted, but I'll just offer a couple quick points. First, I think that any post-Khomeini government, however this ends, it is going to be weaker. Iran is-- it's going to be harder for Iran to be the source of instability in the region that it has been for the better part of 50 years in terms of supporting proxy groups, pursuing a nuclear program, having a missile and drone program that can threaten its neighbors.

It's not going to be able to reconstitute that arsenal anytime soon. But it is still too early to say whether the clerics and the hardline regime is going to hold on. We could see a military takeover. We could see an IRGC surge to-- which is the Iranian Revolutionary Guard surge to the front. We could see a popular uprising once this operational tempo settles.

But as long as the regime has the guns, real political change in Iran is going to be bloody and difficult. And that suggests to me that we're looking at a period of prolonged instability. And I'm happy in the Q&A to get into what that prolonged instability might look like and what it might mean, because the question in my mind is whether-- if I'm right, and we do have a period of prolonged and chronic instability inside Iran-- that is something that is an implosion, meaning Iran is very unstable. But it mainly means it's contained within Iran and does not metastasize throughout the region and further disrupt markets or countries, something like akin to what Iraq was in 2004.

Is it an implosion, or is it an explosion like Syria was in 2014, like Libya was in 2012, an instability that metastasizes within its immediate neighborhood, more broadly, having an impact markets and countries around it? So with that, I'll pause, turn it over to my colleagues, and look forward to your questions and answers in about a half hour. Thank you.

Thank you, Derek. Andy, I think we'll come over to you from your perspective, from a transportation perspective.

(DESCRIPTION)

Andy Dacy, HEAD OF GLOBAL TRANSPORTATION, J.P. MORGAN ASSET MANAGEMENT. Dacy sits against a stylized world map with cross streaks in different colors.

(SPEECH)

Great. Thanks, Brandon. Hi, everybody. My name is Andy Dacy. I run the transport group here at JP Morgan Asset Management. I'll just take the next few minutes to talk a little bit about some of the facts and figures that are coming out of the Middle East, particularly the Persian Gulf, with regard to transportation. At a high level, just speaking from an investment perspective, all these very disturbing geopolitical disruptions that we've been experiencing for the last six or seven years now have been pretty salutary for the shipping industry, specifically.

So going back to COVID, going back to Russia's invasion of Ukraine, which created the dark fleet and sanctions, Houthis closing the Red Sea couple of years ago, now, Iran, the situation with the Straits of Hormuz, all of that has disrupted the flow of trade globally and essentially has artificially compressed, the supply of ships internationally because the ships now, for all the different events that I just mentioned, have to go longer distances to get to their destination. So that artificial supply contraction has just made fewer ships available.

Ships have to go longer distances. The amount of cargo capacity gets shrunk. So the rates that ships earn have skyrocketed, and we've seen this here in the last week or so. I'll give you one example. A very large crude carrier, which already in the run up to the beginning of hostilities, the rates for that ship are beginning to tick up. Now, historically speaking, that ship will earn about $50,000 a day.

Between the beginning of February and the beginning of hostilities last weekend, that ship ran up to about $200,000 a day. And Monday of this week, after everything began, it costs $430,000 a day to rent this ship. So significant volatility to the upside on the shipping industry. But that's all a reflection of all the disruption that's happening within the Arabian Gulf or the Persian Gulf.

So in terms of stats, real quick, as of today, we've seen about seven ships that have been hit by either a missile or a drone, which is not a lot of vessels. Within the Arabian Gulf, there's probably about 1,600, 1,700 ships. But in terms of the ones that really matter, which are the tankers that export crude and that export petroleum products, there's only about 240 of those vessels which represent roughly about 5% to 10% of the fleet in the respective sizes of ships.

So not a significant number of ships that export crude and products stuck in the Persian Gulf. But in some ways, that's almost irrelevant because if you can't get the ships in, and you can't get the ships out, then nothing is moving. And that's pretty much been the case. The entire area was declared a Maritime Warning Zone by the US Navy back on Saturday. So the Arabian Gulf, Gulf of Oman, North Arabian Sea, and the Straits of Hormuz are now all in this high risk area.

Some of you may have heard that the so-called joint war committee, which is a group of insurers that insure shipping, have gotten together. They've actually expanded this high risk area to include the Northwestern Indian Ocean. So it's considered, obviously, a very challenging environment to be in. But all this talk about increasing insurance costs, it's almost not that relevant in the sense that no ships are moving in that area to speak of.

So those costs are not really relevant because the ships aren't going through. They're not actually taking on that insurance cover. I think the bigger issue to keep in mind is not so much the ships but all the impact, the regional oil infrastructure that's happening within the Gulf states specifically. So we've seen ports being targeted. Duqm, which is a port in Oman, has been struck by both missiles and drones. Jebel Ali, which is the port in Dubai, has been hit numerous times.

Qatar has shut down its liquefaction trains. One thing about liquefaction trains is they wanted to get all the gas out of the system in case one of their trains was struck. Obviously, that would create a pretty big explosion. So by getting the gas out of the system, you limit that potential eventuality. But the issue is, to ramp it back up will take some time. We're already seeing gas suppliers within Asia, India, Thailand, China beginning to limit the amount of gas they're going to be supplying to their retail customers. So I think you'll see some inflationary transition into those Asian markets that rely on Middle Eastern gas.

In addition to ports and this liquefaction train, refineries are being struck. Ras Tanura was hit by drones over the past couple of days. In Kuwait, the Mina Al-Ahmadi refinery was also hit. So you're seeing runs of refinery activity being reduced 20% to 30%. And that'll dovetail into the storage issue, which you can keep on producing domestically or within the Gulf region. But at a certain point, the storage tanks are going to be full.

And so then the refineries will start to have to shut down. And this whole lag effect of getting all of this back up and running when the hostilities end, then that's going to be a bit of a delay before we get product and crude back into the international markets. So just real quickly, on the Straits of Hormuz, it's effectively closed. We've seen Russian and Chinese ships go through.

I think the Russian ships are being a little bit more hesitant because there have been examples. I think many of you may have seen in the news a couple of weeks ago, there was a Russian ship escaping Venezuela that got essentially boarded by American Naval forces in the North Atlantic. So I don't think the Russian dark fleet ships are going through, but China's a bit of a different story.

Clearly, China wants the Straits open. I think the US wants them open because probably the uptick in any oil sales that we pick up in the US are going to be severely offset by the inflationary pressures that having the Straits closed will result in. So to Derek's comments, everything that I've been seeing suggests this may not be that long. Obviously, if it goes longer, then you get into big issues.

The big takeaway, too, is about 20 million barrels per day of crude and product that come out of the region, it's about 20% of global demand. There's no way to replace that global demand elsewhere. We've seen a lot of ships reroute to the Atlantic basin, so West Africa, Latin America, as well as the US Gulf. But the amount of capacity to inject into the system is nowhere near 20 million barrels per day that we're losing as a result of the Straits being closed.

And then lastly, I'll just mention in passing that one option that maybe is being talked about, that you might have heard of, is that there are pipelines that go out of the Gulf into the Red Sea and into, I guess, essentially the East Coast of Oman. The problem with that is that of the 20 million barrels per day that go out, the pipeline capacity may be about five to seven million barrels per day. And pipelines are much more militarily exposed than a ship is.

Pipeline has got a very long stretch. And if they get bombed, it takes a while to put them back in place. So I don't think that's a relief valve, even though we have seen some Saudi refineries try to move stuff into the Red Sea, which would have to go north because now the Houthis basically announced on Sunday that they're going to reactivate their hostilities towards commercial shipping. So it's all about duration.

So if this lasts for a month, it won't be that big of a deal. But if it lasts longer, a lack of replacing those exports is going to cause inflationary pressures globally. I'll stop there.

Thank you, Andy. Aga, I'm going to turn it over to you. Obviously, the Strait of Hormuz, a critical passageway for global energy markets more broadly. What's your outlook for the global energy market? What are you seeing?

(DESCRIPTION)

Aga Zmigrodzka, EQUITY RESEARCH ANALYST, ENERGY AND INFRASTRUCTURE, J.P. MORGAN ASSET MANAGEMENT. Zmigrodzka sits next to Hall at a table under the logo for J.P. Morgan Asset Management.

(SPEECH)

Good morning. Thank you so much for having me. First, I think I get a lot of questions why oil prices are not up more. What I would say is heading into this year, oil market was oversupplied. OPEC has started to bring production back from their spare capacity last year. So expectation, actually, at the beginning of the year was that oil prices would move lower.

However, from the beginning of the year, even before the war started, the oil price went up 20% as geopolitical tension has started to increase. So part of the commodity move was already priced in. The price of the-- when you look at the first month to 12 month spread in future oil prices, it's roughly $13. Normally it's $3. So it tells you there is this short term geopolitical premium. And again, it seems like what's priced in right now is that the Strait of Hormuz is closed for three to four weeks, no more.

Same situation with natural gas prices. 20% of global liquefied natural gas is transiting through Strait of Hormuz. When we think how we were positioned heading into it, our portfolios are fairly balanced. We like strong credit rating companies with strong balance sheets, strong reserve life, and more balance on oil and gas. And when I think about other commodities that could be impacted-- jet fuel, these are already spiked a lot.

Europe, for example, imports 40% of their jet fuel from Middle East, and prices start to reflect the risk that it could last a little longer. So the most important part right now to think about is what are the different scenarios? And we talked about what it means for oil under different scenarios. So if the Strait of Hormuz is open tomorrow, oil price actually will come down probably to $60, $65 per barrel because again, the market was well supplied heading into it.

If I think about it's lasting more than a month, we start already to see shut ins. Andy mentioned that in Iraq, the storage is filling up very quickly. So they already announced 1.5 million barrels per day of production shut ins. Kuwait will be most likely next, and then we have a few more weeks to see more shutdowns.

I think Saudi Arabia has most storage, but again, we're talking weeks and not months. That's why it's very important that this conflict is resolved quickly because otherwise, oil prices can move way above $100. And then the regime change scenarios, if it's a regime change that is supported by United States government and sanctions are lifted, then, again, the market should bounce fairly quickly. If there is a chaos in Iran but not in the whole Middle East, and Strait of Hormuz is open, we're talking about 1.7 million barrels per day of exports from Iran that could be at risk.

Right now, it was going to China. There's a question can they produce if there is instability in the country. So that's roughly 1% to 2% of global supply that could be affected in that scenario. So probably we're talking about $70 to $80 price. So again, very uncertain environment.

Different scenarios that we are looking at are basically right now it's similar to what my colleague said is that it's going to be resolved fairly quickly. And again, portfolios are set up for the long term high quality names. And with that, I'll pass it back.

Perfect. Thank you. Thank you, Aga. Rob, we've talked a lot about energy markets, commodities. Would love to hear what you're seeing from fixed income markets as the conflict goes on.

(DESCRIPTION)

Robert Cook, GLOBAL HEAD OF HIGH YIELD FIXED INCOME. G.F.I.C.C., J.P. MORGAN ASSET MANAGEMENT. Cook sits in front of a glass door.

(SPEECH)

Sure, thanks. I think as has been mentioned a couple of times, the market today is not assuming there's going to be a material impact, economic growth, corporate earnings power. There's been some reduction in, I think, the path of Fed cuts this year. But by and large, it's been, I would call it, a very modest move expecting this to be resolved in a short time frame.

I think from my perspective, the more important thing it really reemphasizes a couple of themes that were already taking place in the marketplace, and the first would be one of dispersion. So markets, even though companies in general were performing fairly nicely-- we came out a very good fourth quarter earnings season. I would expect, companies are feeling pretty optimistic rolling into this. We were seeing security prices start to react differently because expectations were fairly full.

And you saw this maybe more pronounced in the equity markets with what's happened in underlying software companies. But we've seen that in the credit markets also. I think it's probably been most prevalent in the private credit market, so in the direct lending market, where concerns around AI disruption, how that could impact the business models of the heavy amount of exposure in those markets, in technology, particularly software, services, roll up strategies that were high, multiple businesses that were really predicated on recurring cash flows. And the concept of AI disrupting some of those business models has really changed people's perceptions around underlying credit strength.

The other theme that we think is happening will be one of we've been in this compression part of the marketplace where, think about it, the incremental compensation in the credit markets you receive as you move down in quality. And I don't mean just in rating quality but a kind of defendability of the business, market share, leadership, cash flow, capabilities of the business, leverage structure had compressed quite a bit really, since releases liberation day.

And so what we think is going to happen is you're going to see some decompression occur over the next several months as people think about tail risk associated with the market, think about the fact that prices are relatively high, and company execution is more important right now than beta. So we do think we're evolving into a period where there's a little bit more uncertainty.

Credit underwriting matters more than it did perhaps in a kind of a rising tide environment that we've been in. So it does highlight to me thinking about some of the tail risks associated with things and making sure your portfolio is properly positioned. And so credit underwriting in the credit markets is taking on newfound importance.

Perfect. Thank you, Rob. David, I know we talked about the economic implications of this event on our last call. We'd love to hear if your views have changed and then also what you took away from what we just heard from our speakers.

Well, thank you. And thank you again to all of you for being so succinct and some really interesting points, which I'll get back to in a minute. But first of all, in terms of the economic outlook, we're getting a lot of numbers which are gradually informing our view on the economy quite separately from what's going on with the situation in the Gulf.

So, first of all, on economic growth, we do have some numbers on light vehicle sales, actually, also heavy truck sales for the month of February. They show a fair amount of weakness. I mean, we did have some pretty crummy weather. But I would emphasize if you look at capital spending overall, it's very strong on AI and data centers. It's pretty weak when it comes to buying things like heavy trucks or in the commercial construction sector overall.

Also, we were looking for a big surge in income tax refunds. Now, I think that's still coming, but one of the really interesting things is just how disorganized the IRS is. Literally this week, they published the form that you're supposed to use if you're going to claim back some of those-- the deduction for overtime and for tips and various other things. And that's fine. But it meant that those who were going to try to do that basically had to put off filing their taxes.

So the overall pace of tax refunds is not as fast as I thought it would be. The average refund is still up from last year but only by about $350. But the key is I think it's coming. It's just not there yet. We also got some data this morning from market and also from ISM on the United States economy but also market looking at the global economy.

And this is data from February, which I know is a few days ago, but it is in some ways the world before this attack. But the global economy was looking pretty strong. If anything, it's accelerating. It was accelerating going into February, so that looked pretty good going into to this year, going into this crisis.

So that's one thing. Another thing is that Scott Bessent, the Treasury Secretary, reaffirmed that they will be paying back or they will be increasing the tariff rate from 10% to 15% very shortly here, so that threat that the president made the day after he raised tariffs to 10% in reaction to the IEEPA ruling. They're going to make good on that. And he did say that by August, he expected tariff rates to be back just before the Supreme Court struck down the IEEPA ruling.

So we were hoping for a little bit of relief on tariffs. It looks like we're going to get less relief than we thought. So if you think about what does that do to the economy, the one other thing I'd say is that I don't think that this particular crisis really slows the economy down that much. The big difference today versus where we were in 2008, versus where we were in 1990 or in 1979 with the Iranian revolution, the big difference today is the United States is a net oil exporter.

Back then, back in 2008, just before the financial crisis, we saw oil prices shoot up. And every dollar that the American consumer had to pay was going overseas, or the extra dollars that American consumers were paying were going overseas to help foreign producers. Today, that has domestic producers.

It is happening. So I think that the effect on economic growth in the United States is not enough to cause us to capitulate in growth here. We do think the first quarter slow is partly weather, partly the delay in refunds. But we think maybe 1% growth first quarter but then jumping to between 2% and 3% growth second quarter, third quarter, coming back down to 1% growth in the fourth quarter. So it looks a little bit like the back of a turtle this year.

We think, overall, it's still a 2% growth economy. But it bulging in the middle, and it will bulge more, of course, if we have tariff rebate checks, which I still think are on the cards with the reconciliation bill later on this year. If you look at inflation, very importantly, just this morning, the AAA put out their daily survey. They show that the average price of regular gasoline this morning was $3.25, which is up by $0.27 from a week ago.

If it holds at this for a while, you're going to have a significant inflation kicker. Now, that gets, obviously, the conversation at this point is really just how long and how badly does all this play out? But I think if you take that point along with the tariff point, it still looks to me like inflation will go-- will peak back over 3% on the CPI by June. But at that point, if Aga is right, for example, when she looks at these future prices and everybody else's, that essentially this is more likely than not going to be a short term crisis in getting these barrels of oil out of the Gulf.

Then oil prices back off towards the end of the year, and that's what's priced into the futures market right now. And that backs away on inflation. So even though right now we're looking at inflation moving up to maybe 3%, 3.5% by the middle of the year, by the end of the year, I still think we're down to 2% and then heading down below 2% in 2027. So I think that's where we are.

I would say, listening to all these comments and again, very fascinating comments on the military situation, the geopolitical situation. But there are some genuine question marks here. I mean, one of them is what kind of regime change do we have? Do we end up with democracy? Do we end up with instability but instability, which really is confined to within Iran and doesn't permeate throughout the region or instability which is so violent and so disorderly that, for example, it means there's a permanent threat on the Strait of Hormuz or on the production facilities and distribution facilities all around the Gulf?

This is a really important question. Another question is just duration. Are we talking about a few more days or for a few more weeks? So I think that's another issue. And then, broadly, and I say this as an absolute non-expert in military conflict, but very often conflicts start with shock and awe, and they end up in quagmire. That really has been the history of American political or American military involvement in many regions around the world.

And so there is always, we don't exactly how it might play out, but it could turn messy and stay messy for a long time. And that could affect a lot of things here. So overall, I think there is an irreducible level of uncertainty about this event and indeed many other political and geopolitical consequences of this event in the months ahead.

So for an asset allocation perspective, I agree with Rob that there is more risk out there. You might see a little widening of credit spreads. I think there's also some duration risk. Remember that if we have to pay back those tariff refunds, if we extend the 2,000 and-- or the new tax cuts from the OBBBA, all of that will make the deficit and the debt even larger going forward. And the cost of this military episode of this attack on Iran, it adds-- it's a very significant cost.

So it does add to overall government borrowing. So overall, these events, I think, ultimately, are somewhat negative for fixed income markets, both in terms of credit spreads and in terms of Treasury rates. I think there's-- equity market, I think, is driving to the beat of a-- marching to the beat of a different drummer right now, but it doesn't like uncertainty. And there are these tail risks.

And the one thing I always say about tail risks is you hedge against a known risk. You diversify against unknown risks. So despite the fact that there has been an initial run to the dollar and flight to safety here, I still think that the long term message is make sure you're diversified around the world and around many different asset classes and types in this environment because the thing that I worry about is not the economy. The economy could look after itself. It usually does.

What I worry about are these outsized side events that could constitute tail risk for investors. And having gained so much money in recent years, I think, obviously, investors really want to hold on to that money at this stage and need to have a very diversified approach. So again, those are the main points that we all want to make here. Now, Brandon, I'm going to turn back to you for any questions.

Sounds good. Thank you very much, David. Thank you, everybody, for your comments. We have about 25 minutes left here for question and answer. Thank you to all of you who have sent in questions thus far, and again, reminder to please do continue to send in questions as we go throughout our live Q&A session.

Derek, I want to direct the first question to you, and it relates to China. We've seen the United States is now acting more aggressively within the Middle East. Do you think that this emboldens China to act a bit more aggressively within their sphere of influence?

I don't, actually. I think China's going to make its decisions on its own timelines. I mean, I think China is watching this conflict closely, obviously, and they're taking different messages out of it. I mean, they're coming to different conclusions.

I mean, on the one hand, once again, they're seeing a display of US military power with which they can only aspire to achieve. I mean, it's important to note that this is only the second major military operation we've seen this year thus far, if you include Venezuela and now this. China has not used its forces in combat since 1979, since its invasion of Vietnam.

So there's capability gaps. China is trying to make up for some of those gaps. Obviously, China, as was noted, has an interest in the outcome here because of their reliance on Iranian oil and energy. And they don't want to see a prolonged disruption in the Gulf. They are also going to be following closely the US munitions stocks, as I mentioned. And they do see that as we're drawing down stocks, and particularly if we start to move munitions out of the Indo-Pacific theater into the Middle East to fuel this war, that's something that they'll be paying close attention to as well.

But I don't think this raises the risk of some sort of dramatic Chinese move in the region in the near term. I mean, I remain worried over the medium to long term about the possibility of confrontation between the US and China. But that's something that I don't think is going to be sparked by this crisis.

And the last thing I'll say is it's once again showing that China has limited ability or, frankly, desire to influence events in the Middle East. I mean, there's occasionally some moves it might make that get a lot of attention that, oh, China is trying to somehow step in and play a role. They do have a diplomat flying throughout the region right now trying to deescalate things.

But it shows that China is not doing anything other than rhetorical support to help Iran right now. There's not much that it can do. And it doesn't-- countries are not necessarily looking to China to help come in and solve this problem. So it's again showing itself to be, in terms of diplomacy, pretty limited right now to the Indo-Pacific.

So no doubt it's watching it very carefully. No doubt that it's drawing different conclusions. The last thing I would say, and this gets maybe a further instance on the timing of why our assessment is this could be days, weeks, but it shouldn't stretch longer than a month, the president is scheduled to go to China at the end of March. He's got a very important visit there. It will be the first presidential visit to China in some time, in five or six years.

And he wants that visit to be a success. And to the extent that this were to stretch on and bump up against that visit, it does raise the potential to, obviously, complicate the visit, if not pull it down altogether. And so that's something I think the White House will be very loath to do. And so that's yet another thing that's kind of hanging out there that might drive the timeline on this because, again, the US can decide and will decide when this ends it.

At this point, it could already say it's achieved a military success. It's taken out the senior leader of Iran. It's taken out most of the senior leaders. It's dealt a blow to the missile and drone capacity, and it's time to move on to the next phase of this drama. The US, owns the clock, and so that's why it could be, at any moment, there's a decision, it's enough. And it's time to move on to the next phase.

Thank you, Derek. I want to bring the conversation back to US financial markets. Aga, I want to come to you with this next question. I know conflict, the duration still unknown, could be resolved, as Derek just said, whenever. But if this conflict does persist, what are the implications for US oil and gas producers and really the sector more broadly?

Great question. I just want to add one comment on China because I think it's important. China was rebuilding their oil inventories last year. So based on some estimates, they actually have four months of imports in storage. So they can also wait. So it's not like they're in a panic right now. They've been restoring.

Going back to US, so I talked to Exxon earlier this week, and they said they're going to be patient. The large, major producers in the United States have set their plans, and they are very optimal. They are running very efficiently in the United States. So they don't want to change that just because oil spike for two weeks.

They're going to patiently looking, if there is a regime change, how long this trade is closed. If they decide we are increasing production, so for Exxon in the Permian, they said five to six months from the decision to when production is going to show up. So there is this lag. That's why they're waiting.

And they're also waiting to see if the futures are moving higher. So some people, maybe not the majors, but smaller players in the United States can then hedge and say, then it's worth it. I can put some money in. So I would say for United States, the resource is there. It's short cycle.

So they really-- it's not like we need to wait years to bring the capacity. They can accelerate. And bigger players like Conoco, Exxon, they have resource in the United States to increase production if the price is high for longer. I just want to make sure it's clear because they are very disciplined. They like the capital allocation that they have right now, the budgets that are set.

If you start to move it around, it's inflationary for their CapEx as well. But it could be resolved. So if we see prices spiking to $100 over, let's say, 9-12 months, the production is going to probably come from United States, and the price will come down again. That's why I feel the long term, maybe then we're going to 80. We're not going to 60, as people were thinking heading into this year. Our normalized oil price view for Brent is $75.

Thank you, Aga. I want to bring the conversation out to global markets. Rob, coming to you here. We're getting questions about two markets in particular. First, could you share whether or not the conflict has changed your outlook for European markets? And then also we'd love to hear your thoughts on emerging market debt as well.

Yeah, sure. Obviously, US-centric business models are more insulated. Think about the impact of the Russian, Ukraine crisis happened. I'll give you an example. In the chemical space, it pretty much decimated European chemical manufacturing footprint over there as the higher-- the global chemicals. And so I do think net-net, it's kind of negative for the European side of the equation versus the US producers on a kind of a micro basis.

Chemicals would be the one easy example of that. But anything on the heavy manufacturing side, you're going to have-- if this persists, you're going to have a higher energy cost. And they were already at a little bit of a competitive disadvantage. So I would say from the perspective of favoring one versus the other in terms of the credit markets, it's a net positive for US in terms of, particularly, on the natural gas side where you continue to have low cost natural gas as a feedstock in the US market.

So clearly, the emerging markets are more risky today than they were. And I think, again, as everything else, there's opportunity underneath that. I would say in everything in the credit markets today, when you're taking on incremental risk, it's the time to use a rifle approach, to use the war analogy, versus a shotgun. And you have to think about countries with better position.

But I do think it's hard to predict, as we said, how this unfolds over the course of time. And I think our general feeling is, it will result in a better world, as we get through. But as Dr. Kelly had mentioned, it could be disruptive from here to there. So again, you have to be mindful of positioning today.

Thank you. Thank you, Rob. Andy, I'm going to pose the next question to you. We've talked a lot about energy markets and stress that markets coming under as it relates to the Strait of Hormuz. I'm wondering if there are any other commodities or goods that come out of the region that are also at risk of stress and worth watching.

I'd add naptha in the petrochemical sector to the equation. What many people don't realize is that 40% of all naptha exports come out of the Middle East. So if you think about the transmission of the increased cost, as other parts of the world have to now provide that and to replace what comes out of the Middle East. I think petrochemical companies, particularly in plastics, are going to be facing much higher feedstock costs. And that, of course, will push up the price of their end product.

So that's one. Another thing I'll mention, too, we've got a lot of distillates that were also coming out of the Middle East. Europe relies heavily on those, and finding enough to replace that is going to be difficult if this lasts for a long time. So again, you'll see inflationary pressures on those commodities heading into Europe.

The one thing I was also going to just mention on the Chinese thing that we've seen that's been interesting is that there apparently has been cooperation between US Naval forces and the Chinese on their wholly-owned vessels in terms of exporting cargo out of the Middle East through the Straits of Hormuz, which I found to be a little surprising. Obviously, the Iranians aren't shooting the Chinese vessels, and I suppose the US is supporting them. And quite a lot of contrast to what I was mentioning about Russia and Russian dark fleet vessels.

The other thing, too, that I think is worth mentioning is that China and Thailand and I think India has been considering is halting all exports of refined petroleum products. And with the Straits closed and with the Red Sea closed, the trade was we had crude going into India, than being re-exported back to Europe. Took a lot longer than in the past when it came directly out of the Middle East.

But I think that could also be part of the equation in the short term. That would just push up inflationary pressures in the energy sector. And then Russia, of course, China is turning to Russia now as these exports dwindle. So that might change the geopolitical equation somewhat, but--

Thank you.

That's all I've got.

Perfect. Thank you, Andy. David, I'm going to pose the next question to you. When we talk about these geopolitical events, the dollar always comes up in conversation as a safe haven asset and as the world's reserve currency. Do recent events, I guess, one, how have they impacted your outlook for the dollar? And do you see its status as the world's reserve currency at risk moving forward?

Well, two different questions. So first of all, we've had a fairly typical rally in the dollar as these events have occurred, and this has not been a huge one. But we've seen some rally in the dollar. And that sort of makes sense, as when you have a geopolitical event like this, people fly to safety. What I think is fascinating, though, is people are obviously-- bond market investors are sophisticated enough to realize that there is also an inflation kicker and a government spending kicker in this.

So you've seen that reflected, that flight to safety, reflected in the foreign exchange, but not so much in fixed income. So I think that that's what's going on very short term. I think long term, it just floats the other way. I think longer term, it means yes, more US debt. I think you have a short term spike in US inflation. But that just means inflation will come down more down the road.

And I think that this opens up the possibility. I mean, suppose you do get to $70 or stay at $75 a barrel in WTI for a while. And maybe gasoline prices are $3.50 to $3.75 in the United States for a while. But then a year from now, we're down at $3 again. Then you've got a further disinflationary effect going into 2027, which the Federal Reserve, under new leadership, could well use as a reason to bring rates down below neutral.

So I think that there is already a compression going on between US rates and overnight rates from the ECB and from the Bank of Japan. I mean, the Europeans aren't easing any more, and the Bank of Japan has only got to tighten here. I think that could continue in 2027. And I think as we've got a new chart in the guide, we're going to highlight this time around.

There is a pretty strong relationship between the gap in two year yields between the United States and other major central banks and the dollar. And so I still think the dollar comes down longer term on this. And if we get stuck in more of a quagmire with more of a commitment to the Middle East because of what's happened, I'm not sure that-- I think that actually probably means people want even more to diversify a little bit away from the dollar.

So I still think the long term trend, this is in our long term capital market assumptions, the dollar is still too expensive. We still have a significant trade deficit. I think capital flows will also probably tend to amplify this. And I think long term, the dollar does come down.

Thank you, David. Derek, I'm going to pose the next question to you. We've seen NATO defense systems, I believe, shoot down a missile that was heading towards Turkey. So the question we're getting is what are the implications, one, for NATO. And then two, have any of the responses or reactions from countries that you've seen, are there any that have been surprising to you thus far?

Taking the first question first-- or second question first, no, actually, I think the international response has been pretty much as anticipated. You've seen some countries offer strong support, many countries offer tepid support. No countries as of yet have engaged in the operations.

There's some question of whether the Europeans, which are deploying a little more capability into theater, whether they might get in the game. Doubtful, but although they are doing some defensive things to help shoot down missiles or drones that are particularly threatening their assets in the region. And similarly with the Gulf partners who have a decent amount of capability, most of that is being used on their own defense.

And my sense is that the US and the Israelis don't really need the help right now in the sense of the military capability that would be gained by involving others. But they do need those Gulf countries in particular to stay strong and to defend themselves. And so that's something I know that the US and the Israelis are working quite hard at.

When it comes to NATO, I would say it's more of an indirect consequence than a direct. Of course, we saw this drone or missile go into Turkey yesterday that was shot down. Not clear whether that was purposely targeted or whether that was a stray missile that had lost its coordinates. So there's always that threat out there.

But when I say indirect, to the extent that more capability is being absorbed in the Middle East, that by definition is going to mean less capability for Ukraine and for Europeans supporting Ukraine. So the US has essentially gotten out of the game of directly supporting Ukraine in the last year, but the Europeans have picked up their support for Ukraine. But a lot of that support is coming from US kit. So it's us giving munitions to the Europeans, which are then giving it to the Ukrainians.

Europeans are obviously putting some of their own munitions into the game, but a lot of it's coming from the US. So to the extent that the US is going to be-- its cupboards will be bare, and they'll be having to use everything they've got for the Middle East, particularly if this goes on, that's going to be harder for Ukraine in terms of getting the support it needs. And we've already seen President Zelenskyy talk about this and stress the concern that he has that this could have implications for Ukraine and, therefore be better for Russia.

Right at bottom line, minimal NATO involvement, obviously, right now, but sort of indirectly it could be quite consequential, particularly if the conflict goes beyond the days and weeks that we've all been saying.

Thank you, Derek.

Sorry, Brandon, I just realized I didn't answer the second part of the caller's question about the reserve currency status. I don't believe that this event changes that. I do think that the global trade war that the United States initiated a year ago is giving countries reason to try to have options. They don't like being-- the things like being blackmailed by the SWIFT network or other things. So I think you will see a gradual attempt by countries to give themselves options to trade or do other things outside of a US dollar framework.

But I still think that the US will retain its reserve currency status because nobody particularly wants to see their currency appreciate dramatically against the US dollar right now.

Great. Thank you, David. Aga, I'm going to pose the next question to you. We still getting a lot of questions about energy markets. And something that's been very topical in energy markets is the longer the traffic in the Strait of Hormuz remains depressed, pretty much at a standstill, the higher the likelihood of production shut in. So could you talk about under what conditions we could see production shut ins, and then after traffic resumes, how long after that does it take to get production back up and running?

Great question. So as I mentioned before, Iraq is already running out of their storage. So they're starting to shut down their production. So we already are losing over 1% of global supply. Next is Kuwait. Then we have Saudi Arabia. We're talking, again, a few weeks, probably three weeks.

And then to restart, it's actually not that hard. So I feel like we can take a few weeks. It's not that hard. So I feel like once you shut in, you can restart the operation. It's like the duration that really matters. I feel like in the United States, US gas producers are experts on restarting wells. They shut them down, restart the next day.

I feel like it's practice that you can restart these wells. So as long as the infrastructure is not damaged-- and so far, yes, we had a few attacks at refineries-- but the damage is not, I would say, material. Qatar LNG was shut down preemptively, so it's not like there was a big damage from the drone. They decided, tanks are full. We are shutting it down.

So again, I would watch also what is the real damage to energy assets, and that will then dictate how quickly we can restart. But so far, we have not seen big signs that they are trying to really destroy key assets in the region.

Understood. Thank you, Aga. Andy, I want to bring the conversation back to you. As an asset owner within the transportation space, I know we've discussed that rerouting supply chain issues are actually a positive to the space more broadly in returns. But from your perspective, what risks are you watching most as-- from the perspective of an asset owner?

As an asset owner, and this is where there's kind of an embarrassment during difficult times. All those geopolitical issues that I mentioned, while they've been tragic on many fronts, whether it's in Ukraine or now here, they've all been really positive for the shipping industry. Like I said, any disruption that affects global supply and the logistics of that supply just compresses that capacity, and that pushes up rates.

In terms of concerns, I mean, one could say, all right, take Qatar, for example. Let's say you had LNG carriers that are leased to them. Typically, those contracts are long duration contracts. They usually have provisions that don't allow the lessee to unilaterally just stop paying you. And if they did, for example, then you-- to the extent you don't have an asset in the Gulf, if it's elsewhere, then you probably have a long term contract that may be at $70,000, $80,000 a day. But if you now have an asset that's freed up internationally, you can tap in.

In this case, LNG rates have gone up to $250,000 a day. So again, it's logistics. If you've got an asset stuck, then you're in a difficult place. But if you don't, as I mentioned, out of the total number of ships in the Gulf, it's a pretty small percentage. So most is out rather than in. So oddly enough, despite all the difficulty in terms of military activity, as an asset owner, most ship owners are sitting pretty.

Thank you, Andy. David, we've talked a lot about energy prices, energy markets. I want to get your opinion on, although, we don't necessarily expect a sustained increase in the price of energy, it is a tail risk. So the question we're getting is how high and for how long do oil prices need to stay high to materially impact the US economy and maybe, more specifically, the US consumer?

Well, exactly. That's really the point here. I think that if you see-- we've had gasoline prices at below $3 a gallon. If they go-- right now we're at $3.25. If they were to jump to $3.50 to $4 and stay there during the year, it further squeezes the income of low and medium income households. And those households are actually getting hit by two things at the same time because we've also seen a spike up, as we've talked about, in electricity prices.

So the lowest 20%, 40%, 60% of American households spend much more of their income on both electricity and gasoline. If both those prices are up at the same time, it squeezes their ability to spend money on other things. So I think that does slow down consumer spending. People are going to end up spending their income tax refunds trying to fill their tank, which is not very-- it won't make them feel very good.

I think it also will have a political impact because the people who voted for the president are really expected to get lower energy prices out of that. And he made a big deal about how gasoline prices are down. Because of a war in which he chose the timing, if nothing else, if because of that, gasoline prices are seen as being much higher and squeezing the average American consumer, I think you get a further blowback in the midterm elections.

And that does have longer term consequences, because if you lose the House of Representatives in a significant way, then it really changes the whole dynamics of fiscal stimulus and regulatory moves and so forth from 2027 and beyond. So I don't think it's enough to say-- even high gasoline prices for a while, I don't think it's enough to sink the US economy and put it into recession. But I think it will really hurt a lot of low and middle income households.

And I think it could have significant political consequences, if not economic consequences, which would have the knock on effect of affecting the whole environment from 2027 and beyond if we have a change in leadership in the House.

Thank you, David. And for those of you asking for the oil page to be put back into the guide, you'll be happy to hear that we are discussing that. And it will be making a reappearance in the second quarter guide.

And I will say that this is what-- this is a move by us in favor of world peace, because every time we take the oil page out of the guide to the markets, all hell breaks loose. So we feel that we are buying some insurance by putting it back in. Maybe even two, some may say. We'll see what happens.

Rob, I think we have time for one more question here, and I want to pose it to you. It's more of a broad question. So despite everything going on, the questions we're getting are from a geographical perspective, what markets do you see the most opportunity in at this point in time?

Yeah, I do think the US, if we're talking about geographic, the US market continues to have the least amount of headwinds, the most tailwinds associated with that. And so even though I talked about dispersion within that, we might see that, as Dr. Kelly just mentioned, low end consumer. You're hedged to that. Certain parts of housing are weak.

We do think the US market is the best positioned market as it relates to the underlying power base that we're seeing, the growth, the deregulation that we're seeing across there. And although the risks have increased in the world, there is a lot of momentum underneath that in terms of the consumer is spending. There is a pretty sizable CapEx cycle going on in the US.

And so I think you do have those tailwinds, and that makes it, in terms of the credit markets, I think the market where you see a lot more fundamental underpinning than some of the markets that are going to be more challenged by the longevity of this disruption.

Thank you, Rob. I think that puts it at time. So again, Rob, Aga, Andy, Derek, David, I want to thank you all for your comments and for joining me here today. And I want to thank you all for tuning in and for those of you who sent in questions. If we did not get to one of the questions that you did send in, please do reach out to a JPMorgan representative, to your JPMorgan representative, and one of us will be happy to get you an answer as soon as possible. Thank you again, and have a great rest of the day.

Thank

(DESCRIPTION)

Logo: J.P. Morgan. Text: KEY RISKS. This material is for information purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. ("JPM"). Products and services described as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibiilty dot support @ j p morgan.com for assistance. Please read all Important information. GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

(SPEECH)

you for joining us. Prior to making financial or investment decisions, you should speak with a qualified professional on your JPMorgan team. This concludes today's webcast. You may now disconnect.

[UPBEAT MUSIC]

(DESCRIPTION)

YOUR INVESTMENTS AND POTENTIAL CONFLICTS OF INTEREST. Conflicts of interest will arise whenever J P Morgan Chase Bank, N.A. or any of its affiliates (together, "J.P. Morgan") have an actual or perceived economic or other incentive in its management of our clients' portfolios to act in a way that benefits J.P. Morgan. Conflicts will result, for example (to the extent the following activities are permitted in your account): (1) when J.P. Morgan invests in an investment product, such as a mutual fund, structured product, separately managed account or hedge fund issued or managed by J P Morgan Chase Bank, N.A. or an affiliate, such as J.P. Morgan Investment Management Inc.; (2) when a J.P. Morgan entity obtains services, including trade execution and trade clearing, from an affiliate: (3) when J.P. Morgan receives payment as a result of purchasing an investment product for a client's account; or (4) when J.P. Morgan receives payment for providing services (including shareholder servicing recordkeeping or custody) with respect to investment products purchased for a client's portfolio. Other conflicts will result because of relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its own account. Investment strategies are selected from both J.P. Morgan and third-party asset managers and are subject to a review process by our manager research teams. From this pool of strategies, our portfolio construction teams select those strategies we believe fit our asset allocation goals and forward-looking views in order to meet the portfolio's investment objective. As a general matter, we prefer J.P. Morgan managed strategies. We expect the proportion of J.P. Morgan managed strategies will be high (in fact, up to 100 percent) in strategies such as, for example, cash and high-quality fixed income, subject to applicable law and any account-specific considerations.

While our internally managed strategies generally align well with our forward-looking views, and we are familiar with the investment processes as well as the risk and compliance philosophy of the firm, it is important to note that J.P. Morgan receives more overall fees when internally managed strategies are included. We offer the option of choosing to exclude J.P. Morgan managed strategies (other than cash and liquidity products) in certain portfolios. The Six Circles Funds are U.S.-registered mutual funds managed by J.P. Morgan and sub-advised by third parties. Although considered internally managed strategies, JPMC does not retain a fee for fund management or other fund services. LEGAL ENTITY, BRAND & REGULATORY INFORMATION. In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A., Member FDIC. JPMorgan Chase Bank, N.A. and its affiliates (collectively 'JPMCB') offer investment products, which may include bank managed investment accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPM. Products not available in all states.

In Germany, this material is issued by J.P. Morgan SE, with its registered office at Taunustor 1 (TaunusTurm). 6 0 3 1 0 Frankfurt am Main, Germany, authorized by the Bundesanstalt für Finanzdienstieistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB). In Luxembourg this material is issued by J.P. Morgan SE -- Luxembourg Branch, with registered office at European Bank and Business Centre, 6 route de Treves. L-2 6 3 3, Senningerberg Luxembourg, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE Luxembourg Branch is also supervised by the Commission de Surveillance du Sectour Financier (CSSF): registered under R.C.S Luxembourg 8 2 5 5 9 3 8 in the United Kingdom, this material is issued by J.P. Morgan SE London Branch, registered office at 25 Bank Street, Canary Wharf, London E14 SJP, authorized by the Bundesanstalt for Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan SE -- London Branch is also supervised by the Financial Conduct Authority and Prudential Regulation Authority. In Spain, this material is distributed by J.P. Morgan SE, Sucursal en Espana, with registered office at Paseo de la Casteliana, 31, 2 8 0 4 6 Madrid, Spain, authorized by the Bundesanstalt für Finanzdienetleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE, Sucursal en Espana is also supervised by the Spanish Securities Market Commission (CNMV): registered with Bank of Spain as a branch of J.P. Morgan SE under code 1 5 6 7. In Italy, this material is distributed by J.P. Morgan S.E. Milan Branch, with its registered office at Via Cordusio, n.3, Milan 2 0 1 2 3, Italy, authorized by the Bundesanstait für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE Milan Branch is also supervised by Bank of Italy and the Commissione Nazionale per le Società e la Borsa (CONSOB); registered with Bank of Italy as a branch of J.P. Morgan SE under code 8 0 7 6; Milan Chamber of Commerce Registered Number: R.E.A. M.I. 2 5 3 6 3 2 5.

In the Netherlands, this material is distributed by J.P. Morgan SE -- Amsterdam Branch, with registered office at World Trade Centre, Tower B, Strawinskylaan 1 1 3 5, 1 0 7 7 X.X., Amsterdam, The Netherlands, authorized by the Bundesanstait für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan S.E. -- Amsterdam Branch is also supervised by De Nederlandsche Bank (DNB) and the Autoriteit Financiele Markten (AFM) in the Netherlands Registered with the Kamer van Koophandel as a branch of J.P. Morgan SE under registration number 7 2 6 1 0 2 2 0.

In Denmark, this material is distributed by J.P. Morgan SE Copenhagen Branch, filial at J.P. Morgan SE, Tyskland, with registered office at Kalvebod Brygge 39 - 41, 1 5 6 0 Kabenhavn V. Denmark, authorized by the Bundesanstalt fur Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB): J.P. Morgan SE Copenhagen Branch, filial at J.P. Morgan SE, Tyskland is also supervised by Finanstilsynet (Danish FSA) and is registered with Finanstilsynet as a branch of J.P. Morgan SE under code 2 9 0 1 0. In Sweden, this material is distributed by J.P. Morgan SE Stockholm Bankfilial, with registered office at Hamngatan 15, Stockholm, 1 1 1 4 7, Sweden, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE Stockholm Bankfilial is also supervised by Finansinspektionen (Swedish FSA); registered with Finansinspektionen as a branch of J.P. Morgan SE. In Belgium, this material is distributed by J.P. Morgan SE - Brussels Branch with registered office at 35 Boulevard du Régent, 1000, Brussels, Belgium, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB); J.P. Morgan SE Brussels Branch is also supervised by the National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA) in Belgium; registered with the NBB under registration number 0715.622.844. In Greece, this material is distributed by J.P. Morgan SE -- Athens Branch, with its registered office at 3 Haritos Street, Athens, 1 0 6 7 5, Greece, authorized by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and jointly supervised by the BaFin, the German Central Bank (Deutsche Bundesbank) and the European Central Bank (ECB) J.P. Morgan SE Athens Branch is also supervised by Bank of Greece: registered with Bank of Greece as a branch of J.P. Morgan SE under code 124; Athens Chamber of Commerce Registered Number 1 5 8 8 8 3 7 6 0 0 0 1; VAT Number 9 9 6 7 6 5 7 7. In France, this material is distributed by JPMorgan Chase Bank, N.A. Paris Branch, registered office at 14, Place Vendome, Paris 7 5 0 0 1, France, registered at the Registry of the Commercial Court of Paris under number 712 334 and

This communication is an advertisement for the purposes of the Markets in Financial instruments Directive (MIFID II) and the Swiss Financial Services Act (FINSA). Investors should not subscribe for or purchase any financial instruments referred to in this advertisement except on the basis of information contained in any applicable legal documentation, which is or shall be made available in the relevant jurisdictions (as required).

In Hong Kong, this material is distributed by JPMCB, Hong Kong branch. JPMCB, Hong Kong branch is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission of Hong Kong. In Hong Kong, we will cease to use your personal data for our marketing purposes without charge if you so request. In Singapore, this material is distributed by JPMCB, Singapore branch. JPMCB, Singapore branch is regulated by the Monetary Authority of Singapore. Dealing and advisory services and discretionary investment management services are provided to you by JPMCB, Hong Kong/Singapore branch (as notified to you). Banking and custody services are provided to you by JPMCB Singapore Branch. The contents of this document have not been reviewed by any regulatory authority in Hong Kong, Singapore or any other jurisdictions. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. For materials which constitute product advertisement under the Securities and Futures Act and the Financial Advisers Act, this advertisement has not been reviewed by the Monetary Authority of Singapore. JPMorgan Chase Bank, N.A., a national banking association chartered under the laws of the United States, and as a body corporate, its shareholder's liability is limited. With respect to countries in Latin America, the distribution of this material may be restricted in certain jurisdictions. We may offer and/or sell to you securities or other financial instruments which may not be registered under, and are not the subject of a public offering under, the securities or other financial regulatory laws of your home country. Such securities or instruments are offered and/or sold to you on a private basis only. Any communication by us to you regarding such securities or instruments, including without limitation the delivery of a prospectus, term sheet or other offering document, is not intended by us as an offer to sell or a solicitation of an offer to buy any securities or instruments in any jurisdiction in which such an offer or a solicitation is unlawful. Furthermore, such securities or instruments may be subject to certain regulatory and/or contractual restrictions on subsequent transfer by you, and you are solely responsible for ascertaining and complying with such restrictions. To the extent this content makes reference to a fund, the Fund may not be publicly offered in any Latin American country, without previous registration of such fund's securities in compliance with the laws of the corresponding jurisdiction.

JPMorgan Chase Bank, N.A. (J P M C B N A) (ABN 43 074 112 011/AFS Licence No: 2 3 8 3 5 7) is regulated by the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. Material provided by J P M C B N A in Australia is to "wholesale clients" only. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001 (C t h). Please inform us if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future. JPMS is a registered foreign company (overseas) (ARBN 1 0 9 2 9 3 6 1 0) incorporated in Delaware, U.S.A., Under Australian financial services licensing requirements, carrying on a financial services business in Australia requires a financial service provider, such as J.P. Morgan Securities LLC (JPMS), to hold an Australian Financial Services Licence (AFSL), unless an exemption applies. JPMS is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (C t h) (Act) in respect of financial services It provides to you, and is regulated by the SEC, FINRA and CFTC under US laws, which differ from Australian laws. Material provided by JPMS in Australia is to "wholesale clients" only. The information provided in this material is not intended to be, and must not be, distributed or passed on, directly or indirectly, to any other class of persons in Australia. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Act. Please inform us immediately If you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future. This material has not been prepared specifically for Australian investors. It: may contain references to dollar amounts which are not Australian dollars; may contain financial information which is not prepared in accordance with Australian law or practices; may not address risks associated with investment in foreign currency denominated investments; and does not address Australian tax issues.

References to "J.P. Morgan" are to JPM, its subsidiaries and affiliates worldwide. "J.P. Morgan Private Bank" is the brand name for the private banking business conducted by JPM. This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for non-personal use -- without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan team. Copyright 2026 JPMorgan Chase & Company. All rights reserved.

Logo: J.P. Morgan.