Russia’s War In Ukraine Has Created ‘Potentially Explosive’ Economic Situation, Warns JPMorgan’s Dimon


Russia’s invasion of Ukraine has created an “unprecedented” situation that could create economic turmoil around the world, warned JPMorgan chief executive Jamie Dimon in his annual letter to shareholders, the latest in a line of business leaders to speak out on the conflict as Western sanctions and the war disrupt markets and critical supply chains.

Jamie Dimon warned of risks due to the conflict in Ukraine.


Key Facts

JPMorgan could lose around $1 billion over time due to the war, Dimon said, though he added that the bank is not worried about its direct exposure to Russia.

Dimon said uncertainty surrounding the conflict—including how long it might last, further Western sanctions, Russian responses to sanctions, wider impacts on supply chains and the refugee crisis it has created—made it hard to gauge the overall outcome, but noted it is already having a “substantial economic impact” and has “roiled global oil, commodity and agricultural markets.”

“At a minimum, [the war] will slow the global economy,” Dimon warned, “and it could easily get worse.”

Russia’s GDP is likely to drop 12.5% by midyear due to the war and resulting sanctions, Dimon said, with the bank’s economists predicting around 2% growth in the euro area, which is highly dependent on Russian gas and oil, and 2.5% in the U.S this year, respectively down 2.5 and 0.5 percentage points from the bank’s predictions six weeks ago.

Dimon urged the U.S. to spearhead a new “Marshall Plan”—the American initiative to help Europe recover after World War Two—to reduce Europe’s dependence on Russian energy exports, ramping up investments in clean energy, promoting energy security, leading the way in setting policies for low-carbon solutions and implementing policies to start cutting emissions today.

What We Don’t Know

How the situation could change. Dimon said most of the bank’s predictions regarding the fallout of Russia’s invasion of Ukraine are based on a static image of the war and resulting sanctions. War is unpredictable and “many more sanctions could be added,” Dimon noted, which could make for a “potentially explosive situation.” Global energy supply chains are particularly “precarious,” Dimon said, and while oil is not as significant as it was 50 years ago, it is still “essential and critical.”

Crucial Quote

“America must be ready for the possibility of an extended war in Ukraine with unpredictable outcomes,” Dimon said. “We should prepare for the worst and hope for the best.” The turmoil should serve as a “wake-up call” to pursue short-term and long-term strategies that both solve short term crises but also maintain the “long-term unity of the newly strengthened democratic alliances.” Any solution should make for a “permanent, long lasting stand for democratic ideals and against all forms of evil,” Dimon said.

Key Background

Dimon is the latest banking leader to outline losses stemming from and speak out against Russian aggression in Ukraine, and JPMorgan and other Wall Street banks have already shuttered operations in the country. The industry is not alone, with major players in pharmaceuticals, tech, energy, transport and food cutting ties. Supply chains have also been impacted heavily, with Ukraine and Russia both major exporters of widely used products in energy—particularly Russian gas and oil—and agriculture.

What To Watch For

An unprecedented “confluence” of factors. The rebound from the Covid-19 pandemic, the war in Ukraine (including sanctions and associated humanitarian crisis) and high inflation has created an “unprecedented” situation that differs from any we’ve experienced in the past, Dimon said. “Their confluence may dramatically increase the risks ahead,” he added, and their impact could be felt for decades. “While it is possible, and hopeful, that all of these events will have peaceful resolutions, we should prepare for the potential negative outcomes.”

Further Reading

Jamie Dimon warns of ‘volatile markets’ as Fed shifts policy (FT)

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