Jamie Dimon sounds alarm over global economy as Gaza and Ukraine wars drag on

Conflicts still pose risks to energy and food markets, 'in addition to their dreadful human cost'

JP Morgan Chase chief executive Jamie Dimon testifies before the US Senate Banking Committee in Washington in December last year. Reuters
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The JP Morgan Chase chief executive Jamie Dimon has warned the wars in Gaza and Ukraine could spill over into the global economy, with their continuation posing a risk not seen since the Second World War.

“Recent events … may very well be creating risks that could eclipse anything since World War II – we should not take them lightly,” Mr Dimon wrote in his annual letter to shareholders.

“The ongoing wars in Ukraine and the Middle East continue to have the potential to disrupt energy and food markets, migration, and military and economic relationships, in addition to their dreadful human cost.”

The International Monetary Fund earlier this year revised its growth forecast for the Middle East and North Africa downwards because of the Israel-Gaza war.

Houthi strikes in the Red Sea have also threatened to disrupt global trade, although the US economy has largely been unaffected so far.

Mr Dimon, considered America's most influential banker, often speaks on global issues and has used his annual letters in years past to touch on politics and global events. His name has previously been floated as a potential Treasury Secretary.

“While we hope the wars in Ukraine and in the Middle East will end eventually (and, we hope, successfully from the standpoint of our allies), these other critical economic battles could possibly continue throughout our lifetime,” he wrote.

Appealing to both Republicans and Democrats, Mr Dimon said providing financial assistance to help Ukraine to victory in its war against Russia was in America's best interests.

“America is never far from being dragged into terrible conflicts. Global wars come to our shores whether we like it or not – we need to stay engaged,” Mr Dimon said.

Aid for Ukraine has been stalled in Congress for months, and the House of Representatives has not yet taken up a bipartisan Senate bill that included $95.3 billion for Ukraine and Israel.

Mr Dimon also said the aid would benefit American manufacturers and help to rebuild US military industrial capacity, a talking point used by supporters for providing assistance to Kyiv.

Dimon sours on soft landing prospects

The JP Morgan chief executive said the US economy remains resilient after a year that saw an “unsettling landscape”, including the collapse of Silicon Valley Bank.

But he is less optimistic on the prospects of a so-called soft landing, which he defined as “modest growth along with declining inflation and interest rates”.

While markets are placing the odds of achieving a soft landing at between 70 per cent and 80 per cent, “I believe the odds are a lot lower than that”, he said.

Mr Dimon added that he is concerned by a number of potential inflationary pressures including ongoing fiscal spending, remilitarisation, the new green economy and potential higher energy costs.

He also said he was concerned by large levels of deficit spending and quantitative easing, “and its reversal, which has never been done before at this scale”.

Mr Dimon once again warned against the Federal Reserve's proposed banking requirements, which would increase JP Morgan's required capital by 25 per cent.

The rules, which are part of the Basel III Endgame, were proposed after the collapse of SVB sparked fears of a new global financial crisis. JP Morgan acquired First Republic Bank after the mid-sized lender failed.

“The new rules do virtually nothing to fix what caused the failure of SVB and First Republic,” he wrote.

Updated: April 08, 2024, 7:44 PM