New York: US stock traders are unprepared for a correction in the S&P 500 that could see the gauge drop as much as 10% from its peak as a result of the war in Iran, according to JPMorgan Chase & Co.’s trading desk.

JPMorgan’s head of global market intelligence Andrew Tyler became “strategically bearish” on US stocks on Monday as the Middle East conflict showed no signs of abating and sent oil above $100 a barrel. The correction would mark a 10% drop from its peak in the US benchmark, meaning the S&P 500 would fall to around 6,270 points – or roughly 7% below where the index closed on Friday.

Investors are not positioned for downside and “currently lacks excessive de-risking with neutral positioning,” Tyler wrote. He said energy stocks sold off on a net basis last week as traders “anticipated de-escalation.” Instead, oil prices topped $100 a barrel over the weekend after several Gulf states cut oil production amid concerns of permanent supply shocks and risks of stagflation.

For Tyler, these risks can be quickly mitigated if the conflict is not prolonged.

“A definite off-ramp to the conflict would end this strategic call as underlying macro fundamentals support risk-assets,” he wrote.