BofA Warns of ‘Mild Stagflation’ as Oil May Remain at $100 Throughout the Year

Bank of America BAC +0.72% ▲ is warning that the ongoing war in Iran could lead to slower growth and higher inflation. This is because oil prices may remain near $100 per barrel throughout the year, even if the conflict ends soon. In a recent note, the bank described the current situation as “mild stagflation,” which means that the economy is slowing down while prices continue to rise. According to its economists, this is already starting to show up in global trends.

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At the same time, Bank of America argues that this is not just an oil issue, but a broader energy problem. While the global economy relies less on oil than in the past, it has become more sensitive to natural gas and fertilizers, which creates added risk, especially for Europe and developing markets. As a result, the bank expects U.S. growth to slow down to about 2.3% in 2026, while inflation could rise to 3.6%, up from 2.8%. Globally, growth is now projected at 3.1%, with inflation increasing to 3.3%.

However, the outlook could worsen if the conflict continues. If tensions escalate, Bank of America warns that higher energy prices combined with falling asset prices could push the global economy toward a recession. Meanwhile, expectations for Federal Reserve rate cuts are being pushed back, with cuts now more likely in the fall than in the summer, and even that remains uncertain. Interestingly, Goldman Sachs GS +1.51% ▲ has a similar view, as it expects cuts later in the year, but notes that a major energy shock could cause enough damage to trigger a recession.

Is SPY Stock a Good Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on SPY stock based on 413 Buys, 82 Holds, and eight Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $804.33 per share implies 22.9% upside potential.

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