Commodities shocks for consumers is a greater risk amid war in Ukraine than the impact to US corporate earnings, JPMorgan says

• Risks posed to US corporate earnings by the war in Ukraine are low, JPMorgan says.
• The shock of higher energy prices could hurt consumer spending, posing a more substantial risk to global equities.

Russia's invasion of Ukraine is a low earnings risk for US corporations while surging energy prices as central banks try to tame hot inflation stands to pose as a more substantial risk to global equities, according to an assessment by JPMorgan.

Equity markets worldwide have been rocked by the war that erupted in Europe and the conflict looks set to drag on longer. Ukraine's foreign minister said Thursday following a meeting with his Russian counterpart that the countries were no closer to arranging a cease-fire.

In looking at the war's impact on global equities, JPMorgan said US companies have low direct exposure to Russia, which has been hit with Western sanctions. Direct US company exposure to Russia was around 0.6% for those in the broad-market Russell 1000 index and direct exposure to Ukraine was less than 0.1% based on disclosed revenues. The small amount of exposure leaves US corporations overall with low earnings risk from the Russia-Ukraine crisis.

"However, an energy price shock amid a central bank pivot focused on inflation could further dampen investor sentiment," the investment bank said in a note published Wednesday.

Indirect risks could be more substantial, it said, listing slower global growth and consumer spending due to higher oil and food prices among them.

Oil prices have soared 50% this year, leaping along with prices for natural gas and coal, on worries about supply shortages from Russia, a major commodities producer. In the US, gas prices for consumers have been climbing, with Triple-A saying the war has stoked further pain at the pump for consumers. The national average for gas prices hit $4.318 a gallon as of Thursday.

Soaring prices for gas, rent and food were the biggest drivers of stronger US inflation in February. The Bureau of Labor Statistics on Thursday said US consumer price inflation rose to 7.9% in February, marking a fresh 40-year high. The report captured activity before the start of the war in Europe.

"Tightening monetary policy remains the key risk for equities as central banks grapple with inflation expectations," said JPMorgan "Policymakers may also consider additional fiscal stimulus such as a U.S. gas tax reduction."

The Federal Reserve is expected next week to start raising interest rates to combat high inflation. The European Central Bank on Thursday accelerated its exit from monetary stimulus measures, indicating its concern about high inflation as the war elevates prices. Euro-area inflation is expected to rise to 5.8% in February from 5.1% in January.